<PAGE>
As filed with the Securities and Exchange Commission on July 15, 1999
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. 46
/X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
/X/
Amendment No. 45
/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
One Logan Square
18th and Cherry Streets
Philadelphia, Pennsylvania 19103-6996
(Name and Address of Agent for Service)
Copy to:
Thomas F. Harvey, Esq.
National City Bank
National City Center
P.O. Box 5756
Cleveland, Ohio 44101-0756
It is proposed that this filing will become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (b)
/X/ 75 days after filing pursuant to paragraph (a)(ii)
/ / on (date) pursuant to paragraph (a)(iii) of rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
-------------------------------
The Title of Securities Being Registered . . . . Shares of beneficial interest
<PAGE>
ARMADA FUNDS
CLASS A AND CLASS B SHARES
PROSPECTUS
SEPTEMBER __, 1999
ARMADA INTERNATIONAL EQUITY FUND
ARMADA SMALL CAP VALUE FUND
ARMADA SMALL CAP GROWTH FUND
ARMADA EQUITY GROWTH FUND
ARMADA TAX MANAGED EQUITY FUND
ARMADA CORE EQUITY FUND
ARMADA EQUITY INDEX FUND
ARMADA EQUITY INCOME FUND
ARMADA BALANCED ALLOCATION FUND
ARMADA TOTAL RETURN ADVANTAGE FUND
ARMADA BOND FUND
ARMADA INTERMEDIATE BOND FUND
ARMADA GNMA FUND
ARMADA ENHANCED INCOME FUND
ARMADA OHIO TAX EXEMPT BOND FUND
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
ARMADA NATIONAL TAX EXEMPT BOND FUND
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
ARMADA TAX EXEMPT MONEY MARKET FUND
ARMADA MONEY MARKET FUND
ARMADA GOVERNMENT MONEY MARKET FUND
ARMADA TREASURY MONEY MARKET FUND
ARMADA MID CAP GROWTH FUND
ARMADA LARGE CAP ULTRA FUND
ARMADA U.S. GOVERNMENT INCOME FUND
ARMADA MICHIGAN MUNICIPAL BOND FUND
ARMADA TREASURY PLUS MONEY MARKET FUND
INVESTMENT ADVISER
NATIONAL CITY INVESTMENT MANAGEMENT COMPANY
INVESTMENT SUB-ADVISER
NATIONAL ASSET MANAGEMENT CORPORATION
(ARMADA CORE EQUITY FUND AND ARMADA TOTAL RETURN ADVANTAGE FUND)
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED ANY FUND SHARES OR
DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.
Page 1 of 79
<PAGE>
HOW TO READ THIS PROSPECTUS
The Armada Funds (the Trust) is a mutual fund family that offers different
classes of shares in separate investment portfolios (Funds). The Funds have
individual investment goals and strategies. This prospectus gives you important
information that you should know about the Class A and Class B Shares of the
Funds before investing. Please read this prospectus and keep it for future
reference.
Class A and Class B Shares have different expenses and other characteristics,
allowing you to choose the class that best suits your needs. You should consider
the amount you want to invest, how long you plan to have it invested, and
whether you plan to make additional investments.
CLASS A SHARES
- FRONT-END SALES CHARGE
- 12b-1 FEES
- $500 MINIMUM INITIAL INVESTMENT
CLASS B SHARES
- CONTINGENT DEFERRED SALES CHARGE
- HIGHER 12b-1 FEES
- $500 MINIMUM INITIAL INVESTMENT
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT
EACH FUND, PLEASE SEE:
PAGE
<TABLE>
<S> <C>
ARMADA INTERNATIONAL EQUITY FUND.................................XXX
ARMADA SMALL CAP VALUE FUND......................................XXX
ARMADA SMALL CAP GROWTH FUND.....................................XXX
ARMADA EQUITY GROWTH FUND........................................XXX
ARMADA TAX MANAGED EQUITY FUND...................................XXX
ARMADA CORE EQUITY FUND..........................................XXX
ARMADA EQUITY INDEX FUND.........................................XXX
ARMADA EQUITY INCOME FUND........................................XXX
ARMADA BALANCED ALLOCATION FUND..................................XXX
ARMADA TOTAL RETURN ADVANTAGE FUND...............................XXX
ARMADA BOND FUND.................................................XXX
ARMADA INTERMEDIATE BOND FUND....................................XXX
ARMADA GNMA FUND.................................................XXX
ARMADA ENHANCED INCOME FUND......................................XXX
ARMADA OHIO TAX EXEMPT BOND FUND.................................XXX
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND..........................XXX
ARMADA NATIONAL TAX EXEMPT BOND FUND.............................XXX
ARMADA OHIO MUNICIPAL MONEY MARKET FUND..........................XXX
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND.................XXX
ARMADA TAX EXEMPT MONEY MARKET FUND..............................XXX
ARMADA MONEY MARKET FUND.........................................XXX
ARMADA GOVERNMENT MONEY MARKET FUND..............................XXX
ARMADA TREASURY MONEY MARKET FUND................................XXX
ARMADA MID CAP GROWTH FUND.......................................XXX
ARMADA LARGE CAP ULTRA FUND......................................XXX
ARMADA U.S. GOVERNMENT INCOME FUND...............................XXX
ARMADA MICHIGAN MUNICIPAL BOND FUND..............................XXX
ARMADA TREASURY PLUS MONEY MARKET FUND...........................XXX
MORE INFORMATION ABOUT RISK......................................XXX
EACH FUND'S OTHER INVESTMENTS....................................XXX
THE INVESTMENT ADVISER, SUB-ADVISER AND
INVESTMENT TEAM..................................................XXX
PURCHASING, SELLING AND EXCHANGING FUND SHARES...................XXX
DIVIDENDS, DISTRIBUTIONS AND TAXES...............................XXX
FINANCIAL HIGHLIGHTS.............................................XXX
HOW TO OBTAIN MORE INFORMATION ABOUT THE
ARMADA FUNDS...................................................Back Cover
</TABLE>
Page 2 of 79
<PAGE>
INTRODUCTION
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.
Each Fund has its own investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help a
Fund achieve its goal. Still, investing in each Fund involves risk and there is
no guarantee that a Fund will achieve its goal. An investment manager's
judgments about the markets, the economy, or companies may not anticipate actual
market movements, economic conditions or company performance, and these
judgments may affect the return on your investment. In fact, no matter how good
a job an investment manager does, you could lose money on your investment in a
Fund, just as you could with other investments. An investment in a Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation (FDIC) or any government agency. In addition, although a
money market fund seeks to keep a constant price per share of $1.00, there is no
guarantee that a money market fund will achieve this goal and it is possible
that you may lose money by investing in the Fund.
The value of your investment in a Fund (other than a money market fund) is based
on the market value of the securities the Fund holds. These prices change daily
due to economic and other events that affect particular companies and other
issuers. These price movements, sometimes called volatility, may be greater or
lesser depending on the types of securities a Fund owns and the markets in which
they trade. The effect on a Fund of a change in the value of a single security
will depend on how widely the Fund diversifies its holdings.
Page 3 of 79
<PAGE>
ARMADA INTERNATIONAL EQUITY FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Equity securities of foreign issuers
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in equity securities of
issuers located in at least three
foreign countries
INVESTOR PROFILE Investors seeking capital
appreciation, who are willing to
accept the risks of foreign investing
***
INVESTMENT STRATEGY OF THE ARMADA INTERNATIONAL EQUITY FUND
***
The Armada International Equity Fund's investment objective is to provide
capital appreciation by investing in a portfolio of equity securities. The
investment objective may be changed without a shareholder vote. The Fund will
normally invest at least 80% of its total assets in the equity securities of
foreign issuers. The Fund focuses on issuers included in the Morgan Stanley
Capital International Europe, Australia, Far East (World EAFE) Index. The
Adviser determines the appropriate distribution of investments among
countries using criteria such as relative valuation, growth prospects and
fiscal, monetary and regulatory government policies. Within foreign markets,
the Adviser buys and sells securities based on its analysis of issuers'
competitive position and valuation.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
PRINCIPAL RISKS OF INVESTING IN THE ARMADA INTERNATIONAL EQUITY FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, international
equity securities, may underperform other equity market segments or the equity
market as a whole.
Page 4 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below would.
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE MORGAN STANLEY EAFE INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- ----------------------------------------------------------------------
<S> <C> <C>
ARMADA INTERNATIONAL EQUITY FUND X.XX% X.XX%*
MORGAN STANLEY EAFE INDEX X.XX% X.XX%**
</TABLE>
* Since August 1, 1997
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest.
See "Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada International Equity Fund -- Class A Shares X.XX%
Armada International Equity Fund -- Class B Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
Page 5 of 79
<PAGE>
ARMADA SMALL CAP VALUE FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Small cap equity securities
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in value-oriented equity
INVESTOR PROFILE Investors seeking capital
appreciation, who are willing to
accept the risk of share price
volatility that may accompany small
cap investing
***
INVESTMENT STRATEGY OF THE ARMADA SMALL CAP VALUE FUND
***
The Armada Small Cap Value Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded small
cap equity securities. The investment objective may be changed without a
shareholder vote. The Fund will normally invest at least 80% of its total assets
in securities of companies with small stock market capitalizations. The Fund may
invest up to 20% of its total assets at the time of purchase in foreign
securities. In buying and selling securities for the Fund, the Adviser uses a
value-oriented approach. The Adviser seeks to invest in equity securities based
upon price/earnings, price/book and price cash/flow ratios which are lower than
the market averages. The Adviser also may consider private market value, balance
sheet strength and long term earnings potential in selecting investments.
The Fund considers a small capitalization or "small cap" company to be one that
has a comparable market capitalization as the companies in the Russell 2000
Value Index.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA SMALL CAP VALUE FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The smaller capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
Therefore, small cap stocks may be more volatile than those of larger companies.
These securities may be traded over-the-counter or listed on an exchange and may
or may not pay dividends.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, small cap equity
securities, may underperform other equity market segments or the equity market
as a whole.
Page 6 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below would.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE RUSSELL 2000 VALUE INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- ------------------------------------------------------------------------
<S> <C> <C>
ARMADA SMALL CAP VALUE FUND X.XX% X.XX%*
RUSSELL 2000 VALUE INDEX X.XX% X.XX%**
</TABLE>
* Since August 15, 1994
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
</TABLE>
- -------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Small Cap Value Fund -- Class A Shares X.XX%
Armada Small Cap Value Fund -- Class B Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
Page 7 of 79
<PAGE>
ARMADA SMALL CAP GROWTH FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Small cap equity securities
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in growth-oriented equity
securities of small issuers
INVESTOR PROFILE Investors seeking capital
appreciation, who are willing to
accept the risk of share price
volatility that may accompany small
cap investing
***
INVESTMENT STRATEGY OF THE ARMADA SMALL CAP GROWTH FUND
***
The Armada Small Cap Growth Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded small
cap equity securities. The investment objective may be changed without a
shareholder vote. The Fund normally invests at least 80% of its total assets
in securities of companies with small stock market capitalizations. The Fund
may invest up to 20% of its total assets at the time of purchase in foreign
securities. In buying and selling securities for the Fund, the Adviser
considers factors such as participation in a fast growing industry, a
strategic niche in a specialized market and fundamental value. The Adviser
also may consider price, trading volume and bid-ask spreads.
The Fund considers a small capitalization or "small cap" company as one that has
a comparable market capitalization as the companies in the Russell 2000 Growth
Index.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA SMALL CAP GROWTH FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The smaller capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
Therefore, small cap stocks may be more volatile than those of larger companies
may. These securities may be traded over-the-counter or listed on an exchange
and may or may not pay dividends.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, small cap equity
securities, may underperform other equity market segments or the equity market
as a whole.
Page 8 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE RUSSELL 2000 GROWTH INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- ----------------------------------------------------------------------
<S> <C> <C>
ARMADA SMALL CAP GROWTH FUND X.XX% X.XX%*
RUSSELL 2000 GROWTH INDEX X.XX% X.XX%**
</TABLE>
* Since August 1, 1997
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
</TABLE>
- -------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Small Cap Growth Fund -- Class A Shares X.XX%
Armada Small Cap Growth Fund -- Class B Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
Page 9 of 79
<PAGE>
ARMADA EQUITY GROWTH FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Large cap equity securities
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in growth-oriented common
stocks of larger issuers
INVESTOR PROFILE Investors seeking capital
appreciation and who are willing to
accept the risk of investing in
equity securities
***
INVESTMENT STRATEGY OF THE ARMADA EQUITY GROWTH FUND
***
The Armada Equity Growth Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded
larger cap equity securities. The investment objective may be changed without
shareholder vote. The Fund will normally invest at least 80% of its total
assets in a diversified portfolio of common stocks and securities convertible
into common stocks of companies with large stock market capitalization. The
Fund may invest up to 20% of its total assets at the time of purchase in
foreign securities. In buying and selling securities for the Fund, the
Adviser considers factors such as historical and projected earnings growth,
earnings quality and liquidity. The Fund generally purchases common stocks
that are listed on a national securities exchange or unlisted securities with
an established over-the-counter market.
The Fund considers a large capitalization or "large cap" company to be one that
has a comparable market capitalization as the companies in the S&P 500 Index.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA EQUITY GROWTH FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, large cap equity
securities, may underperform other equity market segments or the equity market
as a whole.
Page 10 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below would.
1991 X.XX%
1992 X.XX%
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARMADA EQUITY
GROWTH FUND X.XX% X.XX% X.XX% X.XX%*
S&P 500 INDEX X.XX% X.XX% X.XX% X.XX%**
</TABLE>
* Since April 15, 1991
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada Equity Growth Fund -- Class A Shares X.XX%
Armada Equity Growth Fund -- Class B Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
Page 11 of 79
<PAGE>
ARMADA TAX MANAGED EQUITY FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation, while
minimizing the impact of taxes
INVESTMENT FOCUS Equity securities
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in common stock using
strategies designed to minimize the
impact of taxes
INVESTOR PROFILE Investors who are seeking capital
appreciation while minimizing the
impact of taxes and who are willing to
accept the risk of investing in equity
securities
***
INVESTMENT STRATEGY OF THE ARMADA TAX MANAGED EQUITY FUND
***
The Armada Tax Managed Equity Fund's investment objective is to provide
capital appreciation while minimizing the impact of taxes on shareholders'
returns. The investment objective may be changed without a shareholder vote.
The Fund normally invests at least 80% of its total assets in common stocks.
The Fund may invest up to 20% of its total assets at the time of purchase in
foreign securities. The Adviser buys and sells common stocks based on factors
such as historical and projected long-term earnings growth, earnings quality
and liquidity. The Adviser attempts to minimize the realization of taxable
gains by investing in the securities of companies with above average earnings
predictability and stability which the Fund expects to hold for several
years. This generally results in a low level of portfolio turnover. In
addition, the Fund seeks to distribute relatively low levels of taxable
investment income by investing in stocks with low dividend yields. The Fund
is not a tax-exempt fund, and it expects to distribute taxable dividends and
capital gains from time to time.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA TAX MANAGED EQUITY FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, large cap equity
securities, may underperform other equity market segments or the equity market
as a whole.
Page 12 of 79
<PAGE>
PERFORMANCE INFORMATION
There is no performance information for the Class A and B Shares because neither
has completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
----- -----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Tax Managed Equity Fund -- Class A Shares ____%
Armada Tax Managed Equity Fund -- Class B Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
Page 13 of 79
<PAGE>
ARMADA CORE EQUITY FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Large cap common stocks
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in large capitalization
common stocks
INVESTOR PROFILE Investors seeking capital
appreciation, who are willing to
accept the risk of investing in equity
securities
***
INVESTMENT STRATEGY OF THE ARMADA CORE EQUITY FUND
***
The Armada Core Equity Fund's investment objective is to provide capital
appreciation by blending value and growth investment styles. The investment
objective may be changed without a shareholder vote. The Fund normally
invests at least 80% of its total assets in a diversified portfolio of common
stocks and securities convertible into common stocks of companies with large
market capitalizations. The Sub-Adviser normally buys and sells between 20%
and 50% of the Fund's assets in each of three primary groups of equity
securities: common stocks that the Sub-Adviser believes have strong growth
potential, common stocks that the Sub-Adviser believes are undervalued, and
common stocks that offer above-average yields. The Fund may invest up to 20%
of its total assets at the time of purchase in foreign securities.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA CORE EQUITY FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, large cap equity
securities, may underperform other equity market segments or the equity market
as a whole.
Page 14 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below would.
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- ----------------------------------------------------------------------
<S> <C> <C>
ARMADA CORE EQUITY FUND X.XX% X.XX%*
S&P 500 INDEX X.XX% X.XX%**
</TABLE>
* Since August 1, 1997
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Core Equity Fund -- Class A Shares X.XX%
Armada Core Equity Fund -- Class B Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
Page 15 of 79
<PAGE>
ARMADA EQUITY INDEX FUND
FUND SUMMARY
***
INVESTMENT GOAL To approximate, before Fund
expenses, the investment results of
the S&P 500 Index
INVESTMENT FOCUS Common stocks of larger issuers
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in stocks that comprise
the S&P 500 Index
INVESTOR PROFILE Investors seeking returns similar to
the S&P 500 Index, who are willing to
accept the risk of investing in equity
securities
***
INVESTMENT STRATEGY OF THE ARMADA EQUITY INDEX FUND
***
The Armada Equity Index Fund's investment objective is to provide investment
results that, before Fund expenses, approximate the aggregate price and
dividend performance of the securities included in the S&P 500 Index by
investing in securities comprising the S&P 500 Index. The investment
objective may be changed without a shareholder vote. The S&P 500 Index is
made up of common stocks of 500 large, publicly traded companies. The Fund
may also invest in derivative instruments, such as futures, designed to
replicate the performance of the S&P 500 Index. The Fund's ability to
duplicate the performance of the S&P 500 Index will depend to some extent on
the size and timing of cash flows into and out of the Fund, as well as on the
level of the Fund's expenses. The Adviser makes no attempt to "manage" the
Fund in the traditional sense (i.e., by using economic, financial or market
analyses).
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA EQUITY INDEX FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The Fund is also subject to the risk that its market segment, the S&P 500 Index
of common stocks may underperform other equity market segments or the equity
market as a whole.
Page 16 of 79
<PAGE>
PERFORMANCE INFORMATION
There is no performance information for the Class A and B Shares because neither
has completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Equity Index Fund -- Class A Shares ____%
Armada Equity Index Fund -- Class B Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD YOUR EXPENSES WOULD BE:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD YOUR EXPENSES WOULD BE:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
Page 17 of 79
<PAGE>
ARMADA EQUITY INCOME FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Income producing equity securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in equity securities that
provide a higher yield than the
general market
INVESTOR PROFILE Investors seeking an income component
as well as capital appreciation and
who are willing to accept the risk of
investing in equity securities
***
INVESTMENT STRATEGY OF THE ARMADA EQUITY INCOME FUND
***
The Armada Equity Income Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded equity
securities which, in the aggregate, provide a premium current yield. The Fund
normally invests at least 80% of its total assets in common stocks and
securities convertible into common stocks of companies that have the ability to
pay above-average dividends. The Fund may invest up to 20% of its total assets
at the time of purchase in foreign securities. The investment objective may be
changed without a shareholder vote. In buying and selling securities for the
Fund, the Adviser emphasizes equity securities that provide a higher yield than
the general market. The Fund will generally sell securities when their yields
approach a market yield or they otherwise fail to satisfy investment criteria.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA EQUITY INCOME FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, income producing
equity securities, may underperform other equity market segments or the equity
market as a whole.
Page 18 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below would.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE S&P BARRA/VALUE INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- ------------------------------------------------------------------
<S> <C> <C>
ARMADA EQUITY INCOME FUN X.XX% X.XX%*
S&P BARRA/VALUE INDEX X.XX% X.XX%**
</TABLE>
* Since August 22, 1994
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada Equity Income Fund -- Class A Shares X.XX%
Armada Equity Income Fund -- Class B Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
Page 19 of 79
<PAGE>
ARMADA BALANCED ALLOCATION FUND
FUND SUMMARY
***
INVESTMENT GOAL Long-term capital appreciation
and current income
INVESTMENT FOCUS A combination of growth-oriented
common stocks, convertible securities,
fixed income securities and cash
equivalents
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in a diversified portfolio
of growth-oriented common stocks,
convertible securities, investment
grade fixed income securities and cash
equivalents
INVESTOR PROFILE Investors seeking a broad
diversification by asset class and
style to manage risk and provide the
potential for above-average after-tax
returns
***
INVESTMENT STRATEGY OF THE ARMADA BALANCED ALLOCATION FUND
***
The Armada Balanced Allocation Fund's investment objective is to provide
long-term capital appreciation and current income. The investment objective
may be changed without a shareholder vote. The Fund intends to invest 50% to
70% of its net assets in common stocks and convertible securities, 25% to 55%
of its net assets in fixed income securities and up to 30% of its net assets
in cash and cash equivalent securities. The Adviser buys and sells equity
securities based on their potential for long-term capital appreciation. The
Fund invests the fixed income portion of its portfolio of investments in a
broad range of investment grade debt securities (which are those rated at the
time of investment in one of the four highest rating categories by a major
rating agency). The cash equivalent securities in which the Fund normally
invests are short-term obligations.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA BALANCED ALLOCATION FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
The Fund is also subject to the risk that the Adviser's asset allocation
decisions will not anticipate market trends successfully. For example, weighting
common stocks too heavily during a stock market decline may result in a failure
to preserve capital. Conversely, investing too heavily in fixed income
securities during a period of stock market appreciation may result in lower
total return.
The smaller capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
Therefore, small cap stocks may be more volatile than those of larger companies
may. These securities may be traded over-the-counter or listed on an exchange
and may or may not pay dividends.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segments, investment grade
fixed income and growth-oriented equity securities, may underperform other fixed
income or equity market segments or the fixed income or equity markets as a
whole.
Page 20 of 79
<PAGE>
PERFORMANCE INFORMATION
There is no performance information for the Class A and B Shares because neither
has completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada Balanced Allocation Fund -- Class A Shares ____%
Armada Balanced Allocation Fund -- Class B Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
Page 21 of 79
<PAGE>
ARMADA TOTAL RETURN ADVANTAGE FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income as well as preservation
of capital
INVESTMENT FOCUS Investment grade fixed income
securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in investment grade fixed
income securities, while maintaining
an average dollar-weighted maturity of
between four and twelve years
INVESTOR PROFILE Investors seeking total return with
less price volatility than would be
the case if the Fund were to invest
in equity securities, and who are
willing to accept the risks of
investing in fixed income securities
***
INVESTMENT STRATEGY OF THE ARMADA TOTAL RETURN ADVANTAGE FUND
***
The Armada Total Return Advantage Fund's investment objective is to provide
current income as well as preservation of capital by investing primarily in a
portfolio of high- and medium-grade fixed income securities. The investment
objective may be changed without a shareholder vote. The Fund normally invests
at least 80% of the value of its total assets in investment grade fixed income
securities of all types, including asset-backed securities and mortgage-backed
securities and obligations of corporate and governmental issuers. Investment
grade fixed income securities are those rated in one of the four highest rating
categories by a major rating agency, or determined by the Adviser to be of
equivalent quality. In selecting investments for the Fund, the Adviser uses a
number of strategies, including duration/maturity management, sector allocation
and individual security selection. The Fund may invest up to 15% of its assets
in fixed income securities that are non-rated or rated below investment grade.
The Fund generally maintains an average dollar-weighted maturity of between four
and twelve years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA TOTAL RETURN ADVANTAGE FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
Junk bonds involve greater risks of default or downgrade and are more volatile
than investment grade securities. Junk bonds involve greater risk of default or
price declines than investment grade securities due to actual or perceived
changes in an issuer's creditworthiness. In addition, issuers of junk bonds may
be more susceptible than other issuers to economic downturns. Junk bonds are
subject to the risk that the issuer may not be able to pay interest or dividends
and ultimately to repay principal upon maturity. Discontinuation of these
payments could substantially adversely affect the market value of the security.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segment, investment grade
fixed income securities, may underperform other fixed income market segments or
the fixed income market as a whole.
Page 22 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE
BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ARMADA TOTAL RETURN ADVANTAGE FUND X.XX% X.XX%*
LEHMAN BROTHERS GOVERNMENT/
CORPORATE BOND INDEX X.XX% X.XX%**
* Since September 6, 1994
** Since [calc. date for index]
</TABLE>
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada Total Return Advantage Fund -- Class A Shares ____%
Armada Total Return Advantage Fund -- Class B Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
Page 23 of 79
<PAGE>
ARMADA BOND FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income as well as preservation
of capital
INVESTMENT FOCUS Investment-grade fixed income
securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in a diversified portfolio
of investment-grade fixed income
securities, which maintains a
dollar-weighted average maturity of
between four and twelve years
INVESTOR PROFILE Investors seeking current income, and
who are willing to accept the risks of
investing in fixed income securities
***
INVESTMENT STRATEGY OF THE ARMADA BOND FUND
***
The Armada Bond Fund's investment objective is to provide current income as well
as preservation of capital by investing primarily in a portfolio of high- and
medium-grade fixed income securities. The investment objective may be changed
without a shareholder vote. The Fund normally invests at least 80% of the value
of its total assets in investment grade fixed income securities of all types,
including obligations of corporate and governmental issuers and mortgage-backed
and asset-backed securities. Investment-grade fixed income securities are those
rated in one of the four highest rating categories by a major rating agency, or
determined by the Adviser to be of equivalent quality. The Fund generally
maintains a dollar-weighted average maturity of between four and twelve years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA BOND FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segment, investment grade
fixed income securities, may underperform other fixed income market segments or
the fixed income market as a whole.
Page 24 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN AGGREGATE BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- ----------------------------------------------------------------------
<S> <C> <C>
ARMADA BOND FUND X.XX% X.XX%*
LEHMAN AGGREGATE BOND INDEX X.XX% X.XX%**
</TABLE>
Since September 11, 1996
Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada Bond Fund -- Class A Shares ____%
Armada Bond Fund -- Class B Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
Page 25 of 79
<PAGE>
ARMADA INTERMEDIATE BOND FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income as well as preservation
of capital
INVESTMENT FOCUS Investment grade fixed income
securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in investment grade fixed
income securities, while maintaining a
dollar-weighted average maturity of
between two and ten years
INVESTOR PROFILE Investors seeking current income, and
who are willing to accept the risks of
investing in fixed income securities
***
INVESTMENT STRATEGY OF THE ARMADA INTERMEDIATE BOND FUND
***
The Armada Intermediate Bond Fund's investment objective is to provide current
income as well as preservation of capital by investing in a portfolio of high-
and medium-grade fixed income securities. The investment objective may be
changed without a shareholder vote. The Fund normally invests at least 80% of
the value of its total assets in domestic and foreign investment grade fixed
income securities of all types, including obligations of corporate and
governmental issuers and mortgage-backed and asset-backed securities. Investment
grade fixed income securities are those rated in one of the four highest rating
categories by a major rating agency, or determined by the Adviser to be of
equivalent quality. The Fund generally maintains an average maturity of between
two and ten years.
PRINCIPAL RISKS OF INVESTING IN THE ARMADA INTERMEDIATE BOND FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country. These
various risks will be even greater for investments in emerging market countries
since political turmoil and rapid changes in economic conditions are more likely
to occur in these countries.
The Fund is also subject to the risk that its market segment, investment grade
fixed income securities, may underperform other fixed income market segments or
the fixed income market as a whole.
Page 26 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1992 X.XX%
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE
BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
ARMADA INTERMEDIATE BOND FUND X.XX% X.XX% X.XX%*
LEHMAN INTERMEDIATE GOVERNMENT/
CORPORATE BOND INDEX X.XX% X.XX% X.XX%**
</TABLE>
* Since April 15, 1991
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada Intermediate Bond Fund -- Class A Shares ____%
Armada Intermediate Bond Fund -- Class B Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
Page 27 of 79
<PAGE>
ARMADA GNMA FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income as well as preservation
of capital
INVESTMENT FOCUS Mortgage-backed (pass-through)
securities
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT STRATEGY Investing in mortgage pass-through
securities guaranteed by the
Government National Mortgage
Association (GNMA)
INVESTOR PROFILE Investors seeking current income, and
who are willing to accept the risks of
investing in pass through
securities
***
INVESTMENT STRATEGY OF THE ARMADA GNMA FUND
The Armada GNMA Fund's investment objective is to provide current income as well
as preservation of capital by investing primarily in mortgage pass-through
securities guaranteed by GNMA. The investment objective may be changed without a
shareholder vote. The Fund normally invests at least 80% of the value of its
total assets in mortgage pass-through securities guaranteed by GNMA, which is an
agency of the U.S. government established to supervise and finance certain types
of mortgages. In addition to mortgage pass-through securities, the Fund invests
in other types of investment grade fixed income securities.
In buying and selling securities for the Fund, the Adviser assesses current and
projected market conditions and seeks to enhance income by actively adjusting
the average maturity of the Fund to respond to changes.
The Fund's dollar-weighted average portfolio maturity will be between two and
ten years. Investment grade fixed income securities are those rated in one of
the four highest rating categories by a major rating agency, or determined by
the Adviser to be of equivalent quality.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA GNMA FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
Mortgage-backed securities are fixed income securities representing an interest
in a pool of underlying mortgage loans. They are sensitive to changes in
interest rates, but may respond to these changes differently from other fixed
income securities due to the possibility of prepayment of the underlying
mortgage loans. As a result, it may not be possible to determine in advance the
actual maturity date or average life of a mortgage-backed security. Rising
interest rates tend to discourage refinancings, with the result that the average
life and volatility of the security will increase, exacerbating its decrease in
market price. When interest rates fall, however, mortgage-backed securities may
not gain as much in market value because of the expectation of additional
mortgage prepayments that must be reinvested at lower interest rates. Prepayment
risk may make it difficult to calculate the average maturity of the Fund of
mortgage-backed securities and, therefore, to assess the volatility risk of the
Fund.
The Fund is also subject to the risk that its market segment, mortgage-backed
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
Page 28 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN GNMA INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- ----------------------------------------------------------------------
<S> <C> <C>
ARMADA GNMA FUND X.XX% X.XX%*
LEHMAN GNMA INDEX X.XX% X.XX%**
</TABLE>
* Since September 11, 1996
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada GNMA Fund -- Class A Shares ____%
Armada GNMA Fund -- Class B Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
Page 29 of 79
<PAGE>
ARMADA ENHANCED INCOME FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income as well as preservation
of capital
INVESTMENT FOCUS Investment grade debt securities
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT STRATEGY Investing in investment grade fixed
income securities,
while maintaining a dollar-weighted
average maturity of between one and
five years
INVESTOR PROFILE Investors seeking total return and
who are willing to accept some risks
of price volatility
***
INVESTMENT STRATEGY OF THE ARMADA ENHANCED INCOME FUND
***
The Armada Enhanced Income Fund's investment objective is to provide current
income as well as preservation of capital by investing in a portfolio of high-
and medium-grade fixed income securities. The investment objective may be
changed without a shareholder vote. The Fund normally invests at least 80% of
the value of its total assets in investment debt income securities of all
types. Investment grade fixed income
securities are those rated in one of the four highest rating categories by a
major rating agency, or determined by the Adviser to be of equivalent quality.
In buying and selling securities for the Fund, the Adviser considers a number of
factors, including yield to maturity, maturity, quality and the outlook for
particular issuers and market sectors. The Fund generally maintains an average
dollar-weighted portfolio maturity of between one and five years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA ENHANCED INCOME FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund invests in leveraged instruments, such as futures and options
contracts. The more the Fund invests in these leveraged instruments, the greater
the possibility for gains or losses on those investments.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segment, investment grade
fixed income securities, may underperform other fixed income market segments or
the fixed income market as a whole.
Page 30 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE MERRILL LYNCH 1-3 YEAR TREASURY INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ARMADA ENHANCED INCOME FUND X.XX% X.XX%*
MERRILL LYNCH 1-3 YEAR TREASURY INDEX X.XX% X.XX%**
</TABLE>
* Since September 9, 1994
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada Enhanced Income Fund -- Class A Shares ____%
Armada Enhanced Income Fund -- Class B Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD YOUR EXPENSES WOULD BE:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD YOUR EXPENSES WOULD BE:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
Page 31 of 79
<PAGE>
ARMADA OHIO TAX EXEMPT BOND FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income exempt from
Federal income and, to the extent
possible, Ohio personal income
taxes, consistent with conservation of
capital
INVESTMENT FOCUS Ohio municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in municipal obligations
that pay interest that is exempt from
Federal income and Ohio personal
income taxes
INVESTOR PROFILE Investors seeking tax-exempt current
income, and who are willing to accept
moderate share price volatility
***
INVESTMENT STRATEGY OF THE ARMADA OHIO TAX EXEMPT BOND FUND
***
The Armada Ohio Tax Exempt Bond Fund's investment objective is to provide
current income exempt from Federal income tax and, to the extent possible,
from Ohio personal income tax, as is consistent with the conservation of
capital. The investment objective may be changed without a shareholder vote.
Under normal conditions, at least 80% of the value of the Fund's total assets
will be invested in municipal securities. The Fund invests at least 65% of
its total assets in debt securities issued by the State of Ohio, its
political subdivisions and their agencies and instrumentalities that generate
income exempt from Federal income and Ohio personal income taxes (Ohio
municipal securities). The Fund may invest up to 20% of its total assets in
private activity bonds which may be treated as a specific tax preference item
under the federal alternative minimum tax. In selecting securities for the
Fund to buy and sell, the Adviser considers each security's yield and total
return potential relative to other available municipal securities.
The Fund invests in investment grade securities, which are those rated in one of
the four highest rating categories by a major rating agency, or determined by
the Adviser to be of equivalent quality. The Fund ordinarily will maintain an
average weighted portfolio maturity of between two and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and capital gains tax liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA OHIO TAX EXEMPT BOND FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
The Fund is also subject to the risk that its market segment, tax exempt
municipal securities, may underperform other fixed income market segments or the
fixed income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
The Fund's concentration of investments in securities of issuers located in a
single state subjects the Fund to economic and government policies of that
state.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or political and regulatory occurrences affecting one or
more of these issuers, and may experience increased volatility due to its
investments in those securities.
Page 32 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future. The table measures
performance in terms of total return. However, this Fund is managed for yield
and not total return.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1992 X.XX%
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS MUTUAL FUND INTERMEDIATE
INDEX AND THE LEHMAN 7 YEAR MUNI BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ARMADA OHIO TAX EXEMPT BOND FUND X.XX% X.XX% X.XX%*
LEHMAN BROTHERS MUTUAL FUND INTERMEDIATE
INDEX X.XX% X.XX% X.XX%**
LEHMAN 7 YEAR MUNI BOND INDEX X.XX% X.XX% X.XX%**
</TABLE>
* Since April 15, 1991
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada Ohio Tax Exempt Bond Fund -- Class A Shares X.XX%
Armada Ohio Tax Exempt Bond Fund -- Class B Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $XXX $XXX $XXX $XXX
CLASS B SHARES $XXX $XXX $XXX $XXX
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $XXX $XXX $XXX $XXX
CLASS B SHARES $XXX $XXX $XXX $XXX
Page 33 of 79
<PAGE>
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income exempt from both
regular Federal income tax and, to the
extent possible, Pennsylvania personal
income tax as is consistent with
conservation of capital
INVESTMENT FOCUS Pennsylvania municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in municipal obligations
that pay interest that is exempt
from Federal income and Pennsylvania
personal income taxes
INVESTOR PROFILE Investors seeking tax-exempt current
income, and who are willing to accept
moderate share price volatility
***
INVESTMENT STRATEGY OF THE ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
***
The Armada Pennsylvania Municipal Bond Fund's investment objective is to
provide current income exempt from Federal income tax and, to the extent
possible, from Pennsylvania personal income tax as is consistent with
conservation of capital. The investment objective may be changed without a
shareholder vote. The Fund invests primarily in debt securities issued by the
Commonwealth of Pennsylvania, its political subdivisions and their agencies
and instrumentalities that generate income exempt from Federal income and
Pennsylvania personal income taxes (Pennsylvania municipal securities). The
Fund may invest up to 100% of its total assets in private activity bonds
which may be treated as a specific tax preference item under the federal
alternative minimum tax. In selecting securities for the Fund to buy and
sell, the Adviser considers each security's yield and total return potential
relative to other available municipal securities.
The Fund invests in investment grade securities, which are those rated in one of
the four highest rating categories by a major rating agency, or determined by
the Adviser to be of equivalent quality. The Fund ordinarily will maintain an
average weighted portfolio maturity of between two and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and capital gains tax liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
The Fund is also subject to the risk that its market segment, tax free municipal
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
The Fund's concentration of investments in securities of issuers located in a
single state subjects the Fund to economic conditions and government policies
within that state.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or political and regulatory occurrences affecting one or
more of these issuers, and may experience increased volatility due to its
investments in those securities.
Page 34 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future. The table measures
performance in terms of total return. However, this Fund is managed for yield
and not total return.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN BROTHERS MUTUAL FUND
INTERMEDIATE INDEX AND THE LEHMAN 7 YEAR MUNI BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------------------
<S> <C> <C>
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND X.XX% X.XX%*
LEHMAN BROTHERS MUTUAL FUND INTERMEDIATE INDEX X.XX% X.XX%**
LEHMAN 7 YEAR MUNI BOND INDEX X.XX% X.XX%**
</TABLE>
* Since September 11, 1996
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the
Administrator is waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Administrator may
discontinue all or part of these waivers at any time. With these fee
waivers, the Fund's actual total operating expenses are as follows:
Armada Pennsylvania Municipal Bond Fund -- Class A Shares X.XX%
Armada Pennsylvania Municipal Bond Fund -- Class B Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $XXX $XXX $XXX $XXX
CLASS B SHARES $XXX $XXX $XXX $XXX
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $XXX $XXX $XXX $XXX
CLASS B SHARES $XXX $XXX $XXX $XXX
Page 35 of 79
<PAGE>
ARMADA NATIONAL TAX EXEMPT BOND FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income exempt from Federal
income tax as is consistent with
conservation of capital
INVESTMENT FOCUS Municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in municipal obligations
that pay interest that is exempt from
Federal income tax
INVESTOR PROFILE Investors seeking tax-exempt current
income, and who are willing to accept
moderate share price volatility
***
INVESTMENT STRATEGY OF THE ARMADA NATIONAL TAX EXEMPT BOND FUND
***
The Armada National Tax Exempt Bond Fund's investment objective is to provide
current income exempt from Federal income tax as is consistent with
conservation of capital. The investment objective may be changed without a
shareholder vote. The Fund invests primarily in debt securities that generate
income exempt from Federal income tax. The Fund may invest up to 20% of its
total assets in private activity bonds, the income of which may be treated as
a specific tax preference item under the federal alternative minimum tax. The
Fund invests in municipal securities 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. In selecting securities for the Fund to buy and sell, the
Adviser considers each security's yield and total return potential relative
to other available municipal securities.
The Fund invests only in investment grade securities. Investment grade municipal
securities are those rated in one of the four highest rating categories as
determined by a major rating agency. The Fund ordinarily will maintain a
dollar-weighted average portfolio maturity of between two and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and capital gains tax liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA NATIONAL TAX EXEMPT BOND FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
The Fund is also subject to the risk that its market segment, tax exempt
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
Page 36 of 79
<PAGE>
PERFORMANCE INFORMATION
There is no performance information for the Class A and B Shares because neither
has completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
----- -----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- ---------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada National Tax Exempt Bond Fund -- Class A Shares X.XX%
Armada National Tax Exempt Bond Fund -- Class B Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $XXX $XXX $XXX $XXX
CLASS B SHARES $XXX $XXX $XXX $XXX
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A SHARES $XXX $XXX $XXX $XXX
CLASS B SHARES $XXX $XXX $XXX $XXX
Page 37 of 79
<PAGE>
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income exempt from regular
Federal income tax and Ohio personal
income tax, consistent with stability
of principal
INVESTMENT FOCUS Ohio municipal money market
instruments
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of high
quality short-term debt securities
designed to allow the Fund to maintain
a stable net asset value of $1.00 per
share
INVESTOR PROFILE Conservative taxable investors in
higher tax brackets seeking current
income exempt from Federal and Ohio
income taxes
***
INVESTMENT STRATEGY OF THE ARMADA OHIO MUNICIPAL MONEY MARKET FUND
***
The Armada 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. The investment
objective may be changed without a shareholder vote. The Fund invests
exclusively in high quality money market instruments issued by or on behalf
of the State of Ohio, political subdivisions thereof or agencies or
instrumentalities of Ohio or its political subdivisions, the income from
which is exempt from regular Federal income tax and Ohio personal income tax
(Ohio money market instruments). High quality money market instruments are
securities that present minimal credit risks as determined by the Adviser and
generally include securities that are rated at the time of purchase by a
major rating agency in the two highest rating categories for such securities,
and certain securities that are not so rated but are of comparable quality as
determined by the Adviser. The Fund may invest 100% of its assets in private
activity bonds, the interest from which is a preference item for the Federal
alternative minimum tax. Under normal market conditions, at least 80% of the
value of the Fund's total assets will be invested in Ohio money market
instruments. 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.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment and a separate
credit analysis, the Adviser uses gradual shifts in portfolio maturity to
respond to expected changes and selects securities that it believes offer the
most attractive risk/return trade off.
As a money market fund, the Fund invests only in instruments with remaining
maturities of 397 days or less that the Adviser believes present minimal credit
risk. The Fund maintains an average weighted maturity of 90 days or less.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA OHIO MUNICIPAL MONEY MARKET FUND
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, Ohio municipal
money market securities, may underperform other fixed income market segments or
the fixed income market as a whole.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
The Fund's concentration of investments in securities of issuers located in a
single state subjects the Fund to economic and government policies of that
state.
Page 38 of 79
<PAGE>
PERFORMANCE INFORMATION
There is no performance information for the Class A Shares because it has not
completed a full calendar year of operations.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES
- ----------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
-----
Total Annual Fund Operating Expenses X.XX%*
- ----------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada Ohio Municipal Money Market Fund - Class A Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$---- $---- $---- $----
Page 39 of 79
<PAGE>
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
FUND SUMMARY
***
INVESTMENT GOAL High current income exempt from
regular Federal income tax and
Pennsylvania personal income tax,
consistent with stability of principal
INVESTMENT FOCUS Pennsylvania municipal money market
instruments
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of high
quality short-term debt securities
designed to allow the Fund to maintain
a stable net asset value of $1.00 per
share
INVESTOR PROFILE Conservative taxable investors in
higher tax brackets seeking current
income exempt from Federal and
Pennsylvania income taxes
***
INVESTMENT STRATEGY OF THE ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
***
The Armada Pennsylvania Tax Exempt Money Market Fund's investment objective
is to provide current income exempt from regular federal income tax and
Pennsylvania personal income tax, consistent with stability of principal. The
investment objective may be changed without a shareholder vote. The Fund
invests exclusively in high quality money market instruments 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 is
exempt from regular Federal income tax and Pennsylvania income tax
(Pennsylvania municipal money market instruments). High quality money market
instruments are securities that present minimal credit risks as determined by
the Adviser and generally include securities that are rated at the time of
purchase by a major rating agency in the two highest rating categories for
such securities, and certain securities that are not so rated but are of
comparable quality as determined by the Adviser. 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 tax, but it is not considered a reference item
for purposes of the Federal alternative minimum tax.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment and a separate
credit analysis, the Adviser uses gradual shifts in portfolio maturity to
respond to expected changes and selects securities that it believes offer the
most attractive risk/return trade off.
As a money market fund, the Fund invests only in instruments with remaining
maturities of 397 days or less that the Adviser believes present minimal credit
risk. The Fund maintains an average weighted maturity of 90 days or less.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET
FUND
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, tax exempt money
market securities, may underperform other fixed income market segments or the
fixed income market as a whole.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
The Fund's concentration of investments in securities of issuers located in a
single state subjects the Fund to economic and government policies of that
state.
Page 40 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future. The table measures
performance in terms of total return. However, this Fund is managed for yield
and not total return.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND X.XX% X.XX% X.XX% X.XX%*
</TABLE>
* Since September 11, 1996
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES
- -----------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
-----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- -------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada Pennsylvania Tax Exempt Money Market Fund -- Class A Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$---- $---- $---- $----
Page 41 of 79
<PAGE>
ARMADA TAX EXEMPT MONEY MARKET FUND
FUND SUMMARY
***
INVESTMENT GOAL High current interest income exempt
from Federal income tax consistent
with stability of principal while
maintaining liquidity
INVESTMENT FOCUS Municipal money market instruments
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of high
quality short-term debt securities
designed to allow the Fund to maintain
a stable net asset value of $1.00 per
share
INVESTOR PROFILE Conservative taxable investors in
higher tax brackets seeking current
income exempt from Federal income
taxes
***
INVESTMENT STRATEGY OF THE ARMADA TAX EXEMPT MONEY MARKET FUND
***
The Armada 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. The investment
objective may be changed without a shareholder vote. The Fund invests
primarily in high quality money market instruments 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 that pay interest exempt from Federal taxes (municipal money
market instruments). High quality money market instruments are securities
that present minimal credit risks as determined by the Adviser and generally
include securities that are rated at the time of purchase by a major rating
agency in the highest two rating categories for such securities, and certain
securities that are not so rated but are of comparable quality as determined
by the Adviser. Under normal market conditions, at least 80% of the value of
the 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.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment and a separate
credit analysis, the Adviser uses gradual shifts in portfolio maturity to
respond to expected changes and selects securities that it believes offer the
most attractive risk/return trade off.
As a money market fund, the Fund invests only in money market instruments
with remaining maturities of 397 days or less that the Adviser believes
present minimal credit risk. The Fund maintains an average weighted
maturity of 90 days or less.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA TAX EXEMPT MONEY MARKET FUND
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
The Fund is also subject to the risk that its market segment, tax exempt money
market instruments, may underperform other fixed income market segments or the
fixed income market as a whole.
Page 42 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future. The table measures
performance in terms of total return. However, this Fund is managed for yield
and not total return.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1992 X.XX%
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ARMADA TAX EXEMPT MONEY MARKET FUND X.XX% X.XX% X.XX%*
</TABLE>
* Since April 1, 1991
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)* None None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee None X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year
of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
----- -----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
- --------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada Tax Exempt Money Market Fund -- Class A Shares ____%
Armada Tax Exempt Money Market Fund -- Class B Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
</TABLE>
Page 43 of 79
<PAGE>
ARMADA MONEY MARKET FUND
FUND SUMMARY
***
INVESTMENT GOAL High current income consistent with
stability of principal while
maintaining liquidity
INVESTMENT FOCUS Money market instruments
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of high
quality short-term debt securities
designed to allow the Fund to
maintain a stable net asset value
$1.00 per share
INVESTOR PROFILE Conservative investors seeking
current income through a liquid
investment
***
INVESTMENT STRATEGY OF THE ARMADA MONEY MARKET FUND
***
The Armada Money Market Fund's investment objective is to provide as high a
level of current income as is consistent with liquidity and stability of
principal. The investment objective may be changed without a shareholder
vote. The Fund invests in a variety of high quality money market securities,
including certificates of deposit and other obligations issued by domestic
and foreign banks, as well as commercial paper. The Adviser also invests in
securities issued or guaranteed by the U.S. government or its agencies
(government obligations) and repurchase agreements collateralized by
government obligations and issued by financial institutions such as banks and
broker-dealers. High quality money market instruments are securities that
present minimal credit risks as determined by the Adviser and generally
include securities that are rated at the time of purchase by a major rating
agency in the highest two rating categories for such securities, and certain
securities that are not so rated but are of comparable quality as determined
by the Adviser.
In selecting investments for the Fund, the Adviser seeks to add value through
yield analysis and positioning on the yield curve. Investments are made in money
market instruments with the most attractive risk/return trade-offs.
As a money market fund, the Fund invests only in money market instruments
with remaining maturities of 397 days or less that the Adviser believes
present minimal credit risk. The Fund maintains an average weighted maturity
of 90 days or less.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA MONEY MARKET FUND
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, money market
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
Page 44 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
There is no performance information for Class B Shares because it has not
completed a full calendar year of operations.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1992 X.XX%
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ----------------------------------------------------------------------------------------
ARMADA MONEY MARKET FUND X.XX% X.XX% X.XX%*
</TABLE>
* Since April 1, 1991
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)* None None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee None X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within 1 year
of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
----- -----
Total Annual Fund Operating Expenses X.XX%* X.XX%*
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Money Market Fund -- Class A Shares ____%
Armada Money Market Fund -- Class B Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $____ $____ $____ $____
CLASS B SHARES $____ $____ $____ $____
</TABLE>
Page 45 of 79
<PAGE>
ARMADA GOVERNMENT MONEY MARKET FUND
FUND SUMMARY
***
INVESTMENT GOAL High current income consistent with
stability of principal while
maintaining liquidity
INVESTMENT FOCUS Money market instruments issued or
guaranteed by the U.S. government,
its agencies and instrumentalities
and repurchase agreements
SHARE PRICE VOLATILITY Very Low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of high
quality short-term debt securities
issued by the U.S. government, its
agencies and instrumentalities and
repurchase agreements related to such
securities designed to allow the Fund
to maintain a stable net asset value
of $1.00 per share
INVESTOR PROFILE Conservative investors seeking
current income through a liquid
investment
***
INVESTMENT STRATEGY OF THE ARMADA GOVERNMENT MONEY MARKET FUND
***
The Armada Government Money Market Fund's investment objective is to provide
as high a level of current income as is consistent with liquidity and
stability of principal. The investment objective may be changed without a
shareholder vote. The Fund invests exclusively in obligations issued or
guaranteed as to payment of principal and interest by the U.S. government,
its agencies and instrumentalities and repurchase agreements.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment, the Adviser
uses gradual shifts in portfolio maturity to respond to expected changes and
selects securities that it believes offer the most attractive risk/return trade
off.
As a money market fund, the Fund invests only in money market instruments
with remaining maturities of 397 days or less and maintains an average
weighted maturity of 90 days or less.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA GOVERNMENT MONEY MARKET FUND
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segment, money market
instruments issued or guaranteed by the U.S. government, may underperform other
fixed income market segments or the fixed income market as a whole.
Page 46 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1992 X.XX%
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
SINCE
CLASS A SHARES 1 YEAR 5 YEARS INCEPTION
- -------------------------------------------------- ----------- ----------- ---------------
<S> <C> <C> <C>
ARMADA GOVERNMENT MONEY MARKET FUND X.XX% X.XX% X.XX%*
</TABLE>
* Since April 1, 1991
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES
- -------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
-----
Total Annual Fund Operating Expenses X.XX%*
- -------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada Government Money Market Fund -- Class A Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $____ $____ $____ $____
</TABLE>
Page 47 of 79
<PAGE>
ARMADA TREASURY MONEY MARKET FUND
FUND SUMMARY
***
INVESTMENT GOAL High current income consistent with
stability of principal while
maintaining liquidity
INVESTMENT FOCUS U.S. Treasury securities
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of high
quality short-term obligations of the
U.S. Treasury designed to allow the
Fund to maintain a stable net asset
value of $1.00 per share
INVESTOR PROFILE Conservative investors seeking
current income through a liquid
investment
***
INVESTMENT STRATEGY OF THE ARMADA TREASURY MONEY MARKET FUND
***
The Armada Treasury Money Market Fund's investment objective is to provide as
high a level of current income as is consistent with liquidity and stability
of principal. The investment objective may be changed without a shareholder
vote. The Fund invests exclusively in direct obligations of the U.S.
Treasury, such as Treasury bills and notes, and in other money market funds
that invest exclusively in such obligations.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment, the Adviser
uses gradual shifts in portfolio maturity to respond to expected changes and
selects securities that it believes offer the most attractive risk/return trade
off.
As a money market fund, the Fund invests only in money market instruments
with remaining maturities of 397 days or less and maintains an average
weighted maturity of 90 days or less.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA TREASURY MONEY MARKET FUND
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, U.S. Treasury
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
Page 48 of 79
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class A Shares
from year to year.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- ----------------------------------------------------------------------------
<S> <C> <C>
ARMADA TREASURY MONEY MARKET FUND X.XX% X.XX%*
</TABLE>
* Since December 22, 1994
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES
- ------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
-----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada Treasury Money Market Fund -- Class A Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C>
$---- $---- $---- $----
</TABLE>
Page 49 of 79
<PAGE>
ARMADA MID CAP GROWTH FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Mid-cap equity securities
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in growth-oriented equity
securities of medium-sized issuers
INVESTOR PROFILE Investors seeking capital growth, and
who are willing to accept the risks of
investing in equity securities
INVESTMENT STRATEGY OF THE ARMADA MID CAP GROWTH FUND
The Armada Mid Cap Growth Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded mid
cap equity securities. The investment objective may be changed without a
shareholder vote. The Fund will normally invest at least 80% of its total
assets in securities of companies with mid cap stock market capitalization.
The Fund may invest up to 20% of its total assets at the time of purchase in
foreign securities. In selecting investments for the Fund to buy and sell, the
Adviser invests in companies that have typically exhibited consistent,
above-average growth in revenues and earnings, strong management, sound and
improving financial fundamentals and presently exhibit the potential for
growth.
The Fund considers a "mid-capitalization (mid cap)" company to be one that
has a comparable market capitalization as the companies in the Russell Mid
Cap Growth Index.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
PRINCIPAL RISKS OF INVESTING IN THE ARMADA MID CAP GROWTH FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, mid cap equity
securities, may underperform other equity market segments or the equity market
as a whole.
Page 50 of 79
<PAGE>
PERFORMANCE INFORMATION
There is no bar chart or performance table for the Class A and B Shares because
they are not yet operating.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX% X.XX%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
CLASS A SHARES $XXX $XXX
CLASS B SHARES $XXX $XXX
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
CLASS A SHARES $XXX $XXX
CLASS B SHARES $XXX $XXX
</TABLE>
Page 51 of 79
<PAGE>
ARMADA LARGE CAP ULTRA FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Large cap equity securities
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in equity securities of
large companies that the Adviser
believes have the potential for
long-term above-average growth
INVESTOR PROFILE Investors seeking growth of capital,
and who are willing to accept the
risks of investing in equity
securities
***
INVESTMENT STRATEGY OF THE ARMADA LARGE CAP ULTRA FUND
***
The Armada Large Cap Ultra Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded
larger cap equity securities. The investment objective may be changed without
a shareholder vote. The Fund will normally invest at least 80% of its total
assets in the securities of companies with large market capitalizations.
The Adviser takes a long-term approach to managing the Fund and typically
invests in companies that have exhibited consistent, above-average growth in
revenues and earnings, strong management, and sound and improving financial
fundamentals.
The Fund considers a "large capitalization (large cap)" company to be one that
has a comparable market capitalization as the companies in the S&P 500 Barra
Growth Index.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA LARGE CAP ULTRA FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The Fund is also subject to the risk that its market segment, large cap equity
securities, may underperform other equity market segments or the equity market
as a whole.
Page 52 of 79
<PAGE>
PERFORMANCE INFORMATION
There is no bar chart or performance table for the Class A and B Shares because
they are not yet operating.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* None None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee None None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX% X.XX%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
CLASS A SHARES $XXX $XXX
CLASS B SHARES $XXX $XXX
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
CLASS A SHARES $XXX $XXX
CLASS B SHARES $XXX $XXX
</TABLE>
Page 53 of 79
<PAGE>
ARMADA U.S. GOVERNMENT INCOME FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income as well as preservation
of capital
INVESTMENT FOCUS U.S. government securities
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT STRATEGY Investing in mortgage-related
securities issued or guaranteed by the
U.S. government
INVESTOR PROFILE Investors seeking current income,
and who are willing to accept the
risks of investing in fixed income
securities
***
INVESTMENT STRATEGY OF THE ARMADA U.S. GOVERNMENT INCOME FUND
***
The Armada U.S. Government Income Fund's investment objective is to provide
current income as well as preservation of capital by investing primarily in
U.S. government securities. The investment objective may be changed without a
shareholder vote. The Fund invests normally at least 80% of its total assets
in obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. The Fund may invest up to 20% of the value of its total
assets in debt securities and preferred stock of non-governmental issues and
the same proportion of its total assets in non-governmental asset backed
securities. The Fund generally maintains a dollar-weighted average maturity
of between two and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA U.S. GOVERNMENT INCOME FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
The Fund is also subject to the risk that its market segment, U.S. Government
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
Page 54 of 79
<PAGE>
PERFORMANCE INFORMATION
There is no bar chart or performance table for the Class A and B Shares because
they are not yet operating.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX% X.XX%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
CLASS A SHARES $XXX $XXX
CLASS B SHARES $XXX $XXX
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
CLASS A SHARES $XXX $XXX
CLASS B SHARES $XXX $XXX
</TABLE>
Page 55 of 79
<PAGE>
ARMADA MICHIGAN MUNICIPAL BOND FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income exempt from
Federal income tax and, to
the extent possible, from
Michigan personal income tax,
as is consistent with conservation
of capital
INVESTMENT FOCUS Michigan municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in municipal
obligations that pay interest
that is exempt from Federal
and Michigan state income
taxes
INVESTOR PROFILE Investors seeking tax-exempt current
income, and who are willing to accept
moderate share price volatility
***
INVESTMENT STRATEGY OF THE ARMADA MICHIGAN MUNICIPAL BOND FUND
***
The Armada Michigan Municipal Bond Fund's investment objective is to provide
current income exempt from Federal income tax and, to the extent possible,
from Michigan personal income tax, as is consistent with conservation of
capital. Such income may be subject to the federal alternative minimum tax
when received by certain shareholders. The investment objective may be
changed without a shareholder vote. The Fund invests primarily in debt
securities issued by or on behalf of the State of Michigan, its political
subdivisions and its agencies and instrumentalities that generate income
exempt from Federal and Michigan state income, but may be treated as a
preference item for individuals for purposes of the Federal alternative
minimum tax (Michigan municipal securities). The Fund also invests in
municipal securities issued by or on behalf of territories and possessions of
the United States, the District of Columbia and their political subdivisions,
agencies, instrumentalities and authorities. In selecting securities for the
Fund to buy and sell, the Adviser considers each security's yield and total
return potential relative to other available municipal securities. Under
normal market conditions, at least 80% of the value of the Fund's total
assets will be invested in Michigan municipal securities. The Fund may invest
up to 100% of its total assets in private activity bonds which may be treated
as a specific tax preference item under the Federal alternative minimum tax.
The Fund ordinarily will maintain a dollar-weighted average portfolio maturity
of between two and ten years. The Fund invests in investment grade securities,
which are those rated in one of the four highest rating categories by a major
rating agency, or determined by the Adviser to be of equivalent quality.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA MICHIGAN TAX EXEMPT BOND FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
The Fund is also subject to the risk that its market segment, tax free municipal
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
The Fund's concentration of investments in securities of issuers located in a
single state subjects the Fund to economic and government policies of that
state.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or political and regulatory occurrences affecting one or
more of these issuers, and may experience increased volatility due to its
investments in those securities.
Page 56 of 79
<PAGE>
PERFORMANCE INFORMATION
There is no bar chart or performance table for the Class A and B Shares because
they are not yet operating.
The performance of Class A and Class B Shares will differ due to differences in
expenses.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN THE
FUND.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)* X.XX% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)** None X.XX%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
Exchange Fee None None
Maximum Account Fee X.XX% X.XX%
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class B Shares within [2]
year[s] of your purchase. See "Selling Fund Shares."
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- -------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees .XX% .XX%
Distribution and Service (12b-1) Fees .XX% .XX%
Other Expenses .XX% .XX%
---- ----
Total Annual Fund Operating Expenses X.XX% X.XX%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
CLASS A SHARES $XXX $XXX
CLASS B SHARES $XXX $XXX
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
CLASS A SHARES $XXX $XXX
CLASS B SHARES $XXX $XXX
</TABLE>
Page 57 of 79
<PAGE>
ARMADA TREASURY PLUS MONEY MARKET FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income consistent with
liquidity and stability of principal
INVESTMENT FOCUS U.S. Treasury securities and
repurchase agreements related to such
securities
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of high
quality short-term obligations of
the U.S. Treasury designed to allow
the Fund to maintain a stable net
asset value of $1.00 per share
INVESTOR PROFILE Investors seeking current income
through a liquid and stable
investment
***
INVESTMENT STRATEGY OF THE ARMADA TREASURY PLUS MONEY MARKET FUND
***
The Armada Treasury Plus Money Market Fund's investment objective is to
provide current income with liquidity and stability of principal. The
investment objective may be changed without a shareholder vote. The Fund
invests exclusively in obligations issued or guaranteed by the U.S. Treasury
and repurchase agreements related to such securities.
In managing the Fund, the Adviser assesses current and projected market
conditions. Based on this assessment, the Adviser uses gradual shifts in
portfolio maturity to respond to expected changes and selects securities that it
believes offer the most attractive trade off between risk and return.
As a money market fund, the Fund invests only in money market instruments
with remaining maturities of 397 days or less and maintains an average
weighted maturity of 90 days or less.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA TREASURY PLUS MONEY MARKET FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes. Generally, the Fund's fixed
income securities will decrease in value if interest rates rise and vice versa.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. Treasury securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by the U.S. Treasury are backed by
the U.S. Treasury.
The Fund is also subject to the risk that its market segment, U.S. treasury
securities, may underperform other fixed income segments or the fixed income
market as a whole.
Page 58 of 79
<PAGE>
PERFORMANCE INFORMATION
There is no bar chart or performance table for the Class A Shares because they
are not yet operating.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES
- --------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
CLASS A SHARES $XXX $XXX
</TABLE>
Page 59 of 79
<PAGE>
MORE INFORMATION ABOUT RISK
<TABLE>
<S> <C>
EQUITY RISK -- Equity securities include public and privately Armada International Equity Fund
issued equity securities, common and preferred stocks, Armada Small Cap Value Fund
warrants, rights to subscribe to common stock and Armada Small Cap Growth Fund
convertible securities, as well as instruments that attempt Armada Equity Growth Fund
to track the price movement of equity indices. Investments Armada Tax Managed Equity Fund
in equity securities and equity derivatives in general are Armada Core Equity Fund
subject to market risks that may cause their prices to Armada Equity Index Fund
fluctuate over time. The value of securities convertible Armada Equity Income Fund
into equity securities, such as warrants or convertible Armada Balanced Allocation Fund
debt, is also affected by prevailing interest rates, the Armada Total Return Advantage Fund
credit quality of the issuer and any call provision. Armada Enhanced Income Fund
Fluctuations in the value of equity securities in which a Armada Mid Cap Growth Fund
mutual fund invests will cause a fund's net asset value to Armada Large Cap Ultra Fund
fluctuate. An investment in a portfolio of equity
securities may be more suitable for long-term investors who
can bear the risk of these share price fluctuations.
CONVERTIBLE SECURITIES -- Convertible securities Armada Equity Growth Fund
have characteristics of both fixed income and Armada Equity Income Fund
equity securities. The value of the convertible Armada Balanced Allocation Fund
security tends to move with the market value of Armada Mid Cap Growth Fund
the underlying stock, but may also be affected by Armada Large Cap Ultra Fund
interest rates, credit quality of the issuer and
any call provisions.
FIXED INCOME RISK -- The market value of fixed income Armada Balanced Allocation Fund
investments change in response to interest rate changes and Armada Total Return Advantage Fund
other factors. During periods of falling interest rates, Armada Bond Fund
the values of outstanding fixed income securities generally Armada Intermediate Bond Fund
rise. Moreover, while securities with longer maturities Armada GNMA Fund
tend to produce higher yields, the prices of longer maturity Armada Enhanced Income Fund
securities are also subject to greater market fluctuations Armada Ohio Tax Exempt Bond Fund
as a result of changes in interest rates. In addition to Armada Pennsylvania Municipal Bond Fund
these fundamental risks, different types of fixed income Armada National Tax Exempt Bond Fund
securities may be subject to the following additional risks: Armada Ohio Municipal Money Market Fund
Armada Pennsylvania Tax Exempt Money Market Fund
Armada Tax Exempt Money Market Fund
Armada Money Market Fund
Armada Government Money Market Fund
Armada Treasury Money Market Fund
Armada U.S. Government Income Fund
Armada Michigan Municipal Bond Fund
Armada Treasury Plus Money Market Fund
CALL RISK -- During periods of falling interest Armada Balanced Allocation Fund
rates, certain debt obligations with high interest Armada Total Return Advantage Fund
rates may be prepaid (or "called") by the issuer Armada Bond Fund
prior to maturity. This may cause a Fund's average Armada Intermediate Bond Fund
weighted maturity to fluctuate, and may require a Armada GNMA Fund
Fund to invest the resulting proceeds at lower Armada Enhanced Income Fund
interest rates. Armada Ohio Tax Exempt Bond Fund
Armada Pennsylvania Municipal Bond Fund
Armada National Tax Exempt Bond Fund
Armada Mid Cap Growth Fund
Armada U.S. Government Income Fund
Armada Michigan Municipal Bond Fund
Armada Treasury Plus Money Market Fund
CREDIT RISK -- The possibility that an issuer Armada Balanced Allocation Fund
will be unable to make timely payments of Armada Total Return Advantage Fund
either principal or interest. Armada Bond Fund
Armada Intermediate Bond Fund
Armada GNMA Fund
Armada Enhanced Income Fund
Armada Ohio Tax Exempt Bond Fund
Armada Pennsylvania Municipal Bond Fund
Armada National Tax Exempt Bond Fund
Armada Ohio Municipal Money Market Fund
Armada Pennsylvania Tax Exempt Money Market Fund
Armada Tax Exempt Money Market Fund
Armada Money Market Fund
Armada Mid Cap Growth Fund
Armada Michigan Municipal Bond Fund
EVENT RISK -- Securities may suffer declines in Armada Tax Managed Equity Fund
credit quality and market value due to issuer Armada Balanced Allocation Fund
restructurings or other factors. This risk should Armada Total Return Advantage Fund
be reduced because of the diversification provided Armada Bond Fund
by the Fund's multiple holdings. Armada Intermediate Bond Fund
Armada GNMA Fund
Armada Enhanced Income Fund
Armada Ohio Tax Exempt Bond Fund
Armada Pennsylvania Municipal Bond Fund
Armada National Tax Exempt Bond Fund
Armada Ohio Municipal Money Market Fund
Armada Pennsylvania Tax Exempt Money Market Fund
Armada Tax Exempt Money Market Fund
Armada Money Market Fund
Armada Mid Cap Growth Fund
Armada Michigan Municipal Bond Fund
Armada Treasury Plus Money Market Fund
Page 60 of 79
<PAGE>
HIGH-YIELD, LOWER RATED SECURITIES (or "junk Armada Total Return Advantage Fund
bonds") are subject to additional risks associated
with investing in high-yield securities, including:
- - High-yield, lower rated securities involve greater
risk of default or price declines than investments
in investment grade securities (E.G., securities
rated BBB or higher by S&P or Baa or higher by
Moody's) due to changes in the issuer's
creditworthiness.
- - The market for high-yield, lower rated securities
may be thinner and less active, causing market
price volatility and limited liquidity in the
secondary market. This may limit the ability of a
Fund to sell these securities at their fair market
values either to meet redemption requests, or in
response to changes in the economy or the financial
markets.
- - Market prices for high-yield, lower rated
securities may also be affected by investors'
perception of the issuer's credit quality and the
outlook for economic growth. Thus, prices for
high-yield, lower rated securities may move
independently of interest rates and the overall
bond market.
- - The market for high-yield, lower rated securities
may be adversely affected by legislative and
regulatory developments.
MUNICIPAL ISSUER RISK -- There may be economic or Armada Ohio Tax Exempt Bond Fund
political changes that impact the ability of Armada Pennsylvania Municipal Bond Fund
municipal issuers to repay principal and to make Armada National Tax Exempt Bond Fund
interest payments on municipal securities. Changes Armada Ohio Municipal Money Market Fund
to the financial condition or credit rating of Armada Pennsylvania Tax Exempt Money Market Fund
municipal issuers may also adversely affect the Armada Tax Exempt Money Market Fund
value of the Fund's municipal securities. Armada Money Market Fund
Constitutional or legislative limits on borrowing Armada Michigan Municipal Bond Fund
by municipal issuers may result in reduced supplies
of municipal securities. Moreover, certain
municipal securities are backed only by a municipal
issuer's ability to levy and collect taxes.
In addition, the Fund's concentration of investments Armada Ohio Tax Exempt Bond Fund
in issuers located in a single state makes the Armada Pennsylvania Municipal Bond Fund
Fund more susceptible to adverse Armada political Armada Ohio Municipal Money Market Fund
or economic developments affecting that state. Armada Pennsylvania Tax Exempt Money Market Fund
The Fund also may be riskier than mutual funds Armada Money Market Fund
that buy securities of issuers in numerous states. Armada Michigan Municipal Bond Fund
MORTGAGE-BACKED SECURITIES -- Mortgage-backed Armada Total Return Advantage Fund
securities are fixed income securities representing Armada Bond Fund
an interest in a pool of underlying mortgage loans. Armada Intermediate Bond Fund
They are sensitive to changes in interest rates, but Armada GNMA Fund
may respond to these changes differently from other Armada Enhanced Income Fund
fixed income securities due to the possibility of Armada U.S. Government Income Fund
prepayment of the underlying mortgage loans. As a
result, it may not be possible to determine in
advance the actual maturity date or average life of
a mortgage-backed security. Rising interest rates
tend to discourage refinancings, with the result
that the average life and volatility of the security
will increase exacerbating its decrease in market
price. When interest rates fall, however,
mortgage-backed securities may not gain as much in
market value because of the expectation of
additional mortgage prepayments that must be
reinvested at lower interest rates. Prepayment risk
may make it difficult to calculate the average
maturity of a portfolio of mortgage-backed
securities and, therefore, to assess the volatility
risk of that portfolio.
Page 61 of 79
<PAGE>
FOREIGN SECURITY RISKS -- Investments in securities of Armada International Equity Fund
foreign companies or governments can be more volatile than Armada Small Cap Value Fund
investments in U.S. companies or governments. Diplomatic, Armada Small Cap Growth Fund
political, or economic developments, including Armada Equity Growth Fund
nationalization or appropriation, could affect investments in Armada Tax Managed Equity Fund
foreign countries. Foreign securities markets generally have Armada Core Equity Fund
less trading volume and less liquidity than U.S. markets. In Armada Equity Income Fund
addition, the value of securities denominated in foreign Armada Balanced Allocation Fund
currencies, and of dividends from such securities, can change Armada Total Return Advantage Fund
significantly when foreign currencies strengthen or weaken Armada Intermediate Bond Fund
relative to the U.S. dollar. Foreign companies or Armada Enhanced Income Fund
governments generally are not subject to uniform accounting, Armada Mid Cap Growth Fund
auditing, and financial reporting standards comparable to Armada U.S. Government Income Fund
those applicable to domestic U.S. companies or governments.
Transaction costs are generally higher than those in the U.S.
and expenses for custodial arrangements of foreign securities
may be somewhat greater than typical expenses for custodial
arrangements of similar U.S. securities. Some foreign
governments levy withholding taxes against dividend and
interest income. Although in some countries a portion of
these taxes are recoverable, the non-recovered portion will
reduce the income received from the securities comprising the
portfolio.
In addition to these risks, certain foreign securities may be
subject to the following additional risks factors:
CURRENCY RISK -- Investments in foreign securities Armada International Equity Fund
denominated in foreign currencies involve additional Armada Small Cap Value Fund
risks, including: Armada Small Cap Growth Fund
Armada Equity Growth Fund
- - The value of a Fund's assets measured in U.S. Armada Tax Managed Equity Fund
dollars may be affected by changes in currency Armada Core Equity Fund
rates and in exchange control regulations Armada Equity Income Fund
- - A Fund may incur substantial costs in connection Armada Balanced Allocation Fund
with conversions between various currencies. Armada Total Return Advantage Fund
- - A Fund may be unable to hedge against possible Armada Intermediate Bond Fund
variations in foreign exchange rates or to hedge a Armada Enhanced Income Fund
specific security transaction or portfolio Armada Mid Cap Growth Fund
position. Armada U.S. Government Income Fund
- - Only a limited market currently exists for hedging
transactions relating to currencies in certain
emerging markets.
HEDGING RISK -- Hedging is a strategy designed to offset Armada International Equity Fund
investment risks. Hedging activities include, among other Armada Small Cap Value Fund
things, the use of forwards, options and futures. There are Armada Small Cap Growth Fund
risks associated with hedging activities, including: Armada Equity Growth Fund
Armada Tax Managed Equity Fund
- - The success of a hedging strategy may depend on an Armada Core Equity Fund
ability to predict movements in the prices of individual Armada Equity Index Fund
securities, fluctuations in markets, and movements in Armada Equity Income Fund
interest and currency exchange rates. Armada Balanced Allocation Fund
- - There may be an imperfect or no correlation between Armada Total Return Advantage Fund
the changes in market value of the securities held by Armada Bond Fund
the Fund or the currencies in which those securities are Armada Intermediate Bond Fund
denominated and the prices of forward contracts, futures Armada GNMA Fund
and options on futures. Armada Enhanced Income Fund
- - There may not be a liquid secondary market for a Armada Mid Cap Growth Fund
futures contract or option. Armada U.S. Government Income Fund
- - Trading restrictions or limitations may be imposed Armada Michigan Municipal Bond Fund
by an exchange, and government regulations may restrict Armada Treasury Plus Money Market Fund
trading in currencies, futures contracts and options.
Page 62 of 79
<PAGE>
LEVERAGING RISK -- Leveraging activities include, among other Armada International Equity Fund
things, borrowing and the use of short sales, options and Armada Small Cap Value Fund
futures. There are risks associated with leveraging Armada Small Cap Growth Fund
activities, including: Armada Equity Growth Fund
Armada Tax Managed Equity Fund
- - A fund experiencing losses over certain ranges in Armada Core Equity Fund
the market that exceed losses experienced by a Armada Equity Index Fund
non-leveraged Fund. Armada Equity Income Fund
- - There may be an imperfect or no correlation between Armada Balanced Allocation Fund
the changes in market value of the securities held by a Armada Total Return Advantage Fund
fund and the prices of futures and options on futures. Armada Intermediate Bond Fund
- - Although the funds will only purchase Armada GNMA Fund
exchange-traded futures and options, due to market Armada Enhanced Income Fund
conditions there may not be a liquid secondary market Armada Ohio Municipal Money Market Fund
for a futures contract or option. As a result, the Armada Pennsylvania Tax Exempt Money Market Fund
funds may be unable to close out their futures or Armada Tax Exempt Money Market Fund
options contracts at a time which is advantageous. Armada Money Market Fund
- - Trading restrictions or limitations may be imposed Armada Government Money Market Fund
by an exchange, and government regulations may restrict Armada Mid Cap Growth Fund
trading in futures contracts and options. Armada U.S. Government Income Fund
Armada Michigan Municipal Bond Fund
In addition, the following leveraged instruments are subject Armada Treasury Plus Money Market Fund
to certain specific risks:
DERIVATIVES RISK -- The Funds use derivatives to Armada International Equity Fund
attempt to achieve their investment objectives, Armada Small Cap Value Fund
while at the same time maintaining liquidity. To Armada Small Cap Growth Fund
collateralize (or cover) these derivatives Armada Equity Growth Fund
transactions, the Funds hold cash or U.S. government Armada Tax Managed Equity Fund
securities. Armada Core Equity Fund
Armada Equity Index Fund
Armada Equity Income Fund
Armada Balanced Allocation Fund
Armada Total Return Advantage Fund
Armada Bond Fund
Armada Intermediate Bond Fund
Armada GNMA Fund
Armada Enhanced Income Fund
Armada Ohio Municipal Money Market Fund
Armada Pennsylvania Tax Exempt Money Market Fund
Armada Tax Exempt Money Market Fund
Armada Money Market Fund
Armada Government Money Market Fund
Armada Treasury Money Market Fund
Armada Mid Cap Growth Fund
Armada U.S. Government Income Fund
Armada Treasury Plus Money Market Fund
FUTURES -- Futures contracts and options on futures Armada International Equity Fund
contracts provide for the future sale by one party Armada Small Cap Value Fund
and purchase by another party of a specified amount Armada Small Cap Growth Fund
of a specific security at a specified future time Armada Equity Growth Fund
and at a specified price. An option on a futures Armada Tax Managed Equity Fund
contract gives the purchaser the right, in exchange Armada Equity Index Fund
for a premium, to assume a position in a futures Armada Equity Income Fund
contract at a specified exercise price during the Armada Balanced Allocation Fund
term of the option. Index futures are futures Armada Total Return Advantage Fund
contracts for various indices that are traded on Armada Bond Fund
registered securities exchanges. Armada GNMA Fund
Armada Enhanced Income Fund
Armada Mid Cap Growth Fund
The Funds may use futures contracts and related Armada U.S. Government Income Fund
options for bona fide hedging purposes to offset
changes in the value of securities held or expected
to be acquired. They may also be used to gain
exposure to a particular market or instrument, to
create a synthetic money market position, and for
certain other tax-related purposes. The Funds will
only enter into futures contracts traded on a
national futures exchange or board of trade.
OPTIONS -- The buyer of an option acquires the right Armada International Equity Fund
to buy (a call option) or sell (a put option) a Armada Small Cap Value Fund
certain quantity of a security (the underlying Armada Small Cap Growth Fund
security) or instrument at a certain price up to a Armada Equity Growth Fund
specified point in time. The seller or writer of an Armada Tax Managed Equity Fund
option is obligated to sell (a call option) or buy Armada Core Equity Fund
(a put option) the underlying security. When Armada Equity Income Fund
writing (selling) call options on securities, the Armada Balanced Allocation Fund
Funds may cover its position by owning the Armada Total Return Advantage Fund
underlying security on which the option is written Armada Bond Fund
or by owning a call option on the underlying Armada GNMA Fund
security. Alternatively, the Funds may cover its Armada Enhanced Income Fund
position by maintaining in a segregated account cash Armada Mid Cap Growth Fund
or liquid securities equal in value to the exercise Armada U.S. Government Income Fund
price of the call option written by the Funds. Armada Michigan Municipal Bond Fund
Page 63 of 79
<PAGE>
Because option premiums paid or received by the
Funds are small in relation to the market value of
the investments underlying the options, buying and
selling put and call options can be more speculative
than investing directly in securities.
SHORT SALES -- Short sales are transactions in which Armada Balanced Allocation Fund
a Fund sells a security it does not own. To Armada GNMA Fund
complete a short sale, a Fund must borrow the Armada Mid Cap Growth Fund
security to deliver to the buyer. The Fund is then Armada U.S. Government Income Fund
obligated to replace the borrowed security by
purchasing the security at the market price at the
time of replacement. This price may be more or less
than the price at which the security was sold by the
Fund.
REAL ESTATE INVESTING -- The Fund's investments in the Armada Mid Cap Growth Fund
securities of real estate investment trusts (REITs) and
companies principally engaged in the real estate industry
may subject the Fund to the risks associated with the direct
ownership of real estate. Risks commonly associated with
the direct ownership of real estate include fluctuations in
the value of underlying properties and defaults by borrowers
or tenants. In addition to these risks, REITs are dependent
on specialized management skills and some REITs may have
investments in relatively few properties, or in a small
geographic area or a single type of property. These factors
may increase the volatility of the Fund's investments in
REITs.
REGIONAL RISK -- To the extent that a Fund's investments are Armada Ohio Tax Exempt Bond Fund
concentrated in a specific geographic region, the Fund may Armada Pennsylvania Municipal Bond Fund
be subject to the political and other developments affecting Armada Ohio Municipal Money Market Fund
that region. Regional economies are often closely Armada Pennsylvania Tax Exempt Money Market Fund
interrelated, and political and economic developments Armada Money Market Fund
affecting one region, country or state often affect other Armada Michigan Municipal Bond Fund
regions, countries or states, thus subjecting a Fund to
additional risks.
TRACKING ERROR RISK -- Factors such as Fund expenses, Armada Equity Index Fund
imperfect correlation between the Fund's investments and Armada Total Return Advantage Fund
those of their benchmarks, rounding of share prices, changes Armada Bond Fund
to the benchmark, regulatory policies, and leverage, may Armada Intermediate Bond Fund
affect their ability to achieve perfect correlation. The Armada GNMA Fund
magnitude of any tracking error may be affected by a higher Armada Enhanced Income Fund
portfolio turnover rate. Because an index is just a
composite of the prices of the securities it represents
rather than an actual portfolio of those securities, an
index will have no expenses. As a result, a Fund, which
will have expenses such as taxes, custody, management fees
and other operational costs, and brokerage, may not achieve
its investment objective of accurately correlating to an
index.
YEAR 2000 RISK -- The Funds depend on the smooth functioning All Funds
of computer systems in almost every aspect of their business.
Like other mutual funds, businesses and individuals around
the world, the Funds could be adversely affected if the
computer systems used by its service providers do not
properly process dates on and after January 1, 2000, and
distinguish between the year 2000 and the year 1900. The
Funds have asked their service providers whether they expect
to have their computer systems adjusted for the year 2000
transition, and is seeking assurances from each service
provider that they are devoting significant resources to
prevent material adverse consequences to the Funds. While it
is likely that such assurances will be obtained, the Funds
and their shareholders may experience losses if these
assurances prove to be incorrect or as a result of year 2000
computer difficulties experienced by issuers of portfolio
securities or third parties, such as custodians, banks,
broker-dealers or others with which the Funds do business.
In addition, to the extent that the operations of issuers of
securities held by a Fund are impaired by the year 2000
transition, or prices of securities held by a Fund decline
as a result of real or perceived problems relating to the
year 2000, the value of such Fund's shares may be materially
affected.
Furthermore, many foreign countries are not as prepared as Armada International Equity Fund
the U.S. for the year 2000 transition. As a result, computer Armada Small Cap Value Fund
difficulties in foreign markets and with foreign institutions Armada Small Cap Growth Fund
as a result of the year 2000 may add to the possibility of Armada Equity Growth Fund
losses to the Funds and their shareholders. Armada Tax Managed Equity Fund
Armada Core Equity Fund
Armada Equity Income Fund
Armada Balanced Allocation Fund
Armada Total Return Advantage Fund
Armada Intermediate Bond Fund
Armada Enhanced Income Fund
Armada Mid Cap Growth Fund
Armada U.S. Government Income Fund
</TABLE>
Page 64 of 79
<PAGE>
EACH FUND'S OTHER INVESTMENTS
In addition to the investments and strategies described in this prospectus, each
Fund also may invest in other securities, use other strategies and engage in
other investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information. Of course, the Trust cannot guarantee that any Fund will
achieve its investment goal.
The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic, market, political or
other conditions, or for temporary defensive or liquidity purposes, each Fund
(except for money market funds) may invest up to 100% of its assets in
short-term high quality debt instruments that would not ordinarily be
consistent with a Fund's principal investment strategies. A Fund will do so
only if the Adviser or Sub-Adviser believes that the risk of loss outweighs
the opportunity for achieving a Fund's investment objective.
INVESTMENT ADVISER, SUB-ADVISER AND INVESTMENT TEAM
The Investment Adviser makes investment decisions for the Funds and continuously
reviews, supervises and administers each Fund's respective investment program.
The Investment Adviser oversees the Sub-Adviser to ensure compliance with the
Funds' investment policies and guidelines, and monitors the Sub-Adviser's
adherence to its investment style. The Adviser pays the Sub-Adviser out of the
Investment Advisory fees it receives (described below).
The Board of Trustees of the Trust supervises the Adviser and establishes
policies that the Adviser must follow in its management activities.
National City Investment Management Company ("IMC"), with its principal offices
at 1900 East Ninth Street, Cleveland, Ohio 44114, serves as Adviser to the
Funds. On March 31, 1999, IMC had approximately $23.7 billion in assets under
management.
IMC utilizes a team approach for management of the Funds. No one person is
primarily responsible for making investment recommendations to the team. In the
case of the Armada Core Equity and the Armada Total Return Advantage Funds,
National Asset Management Corporation ("NAM") serves as Sub-Adviser and manages
these funds on a day-to-day basis; NAM selects, buys and sells the securities of
these Funds under the supervision of the Adviser and the Board of Trustees.
The table below shows the IMC management team responsible for each fund as well
as the advisory fees IMC received for each fund for the fiscal period ended May
31, 1999.
***
Page 65 of 79
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
ADVISORY FEES PAID AS A
PERCENTAGE OF AVERAGE NET
MANAGEMENT TEAM/INVESTMENT ASSETS FOR THE FISCAL YEAR
FUND NAME ADVISER ENDED MAY 31, 1999
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Equity Fund International Equity Team [ ]%
- -------------------------------------------------------------------------------------------------------------
Small Cap Value Fund Equity Value Team [ ]%
- -------------------------------------------------------------------------------------------------------------
Small Cap Growth Fund Small Cap Growth Team [ ]%
- -------------------------------------------------------------------------------------------------------------
Equity Growth Fund Large Cap Growth Team [ ]%
- -------------------------------------------------------------------------------------------------------------
Tax Managed Equity Fund Large Cap Growth Team [ ]%
- -------------------------------------------------------------------------------------------------------------
National Asset Management
Core Equity Fund (sub-adviser) [ ]%
- -------------------------------------------------------------------------------------------------------------
Equity Index Fund Equity Value Team [ ]%
- -------------------------------------------------------------------------------------------------------------
Equity Income Fund Equity Value Team [ ]%
- -------------------------------------------------------------------------------------------------------------
Large Cap Growth and Fixed
Balanced Allocation Fund Income Teams [ ]%
- -------------------------------------------------------------------------------------------------------------
National Asset Management
Total Return Advantage Team (sub-adviser) [ ]%
- -------------------------------------------------------------------------------------------------------------
Bond Fund Fixed Income Team [ ]%
- -------------------------------------------------------------------------------------------------------------
Intermediate Bond Fund Fixed Income Team [ ]%
- -------------------------------------------------------------------------------------------------------------
GNMA Fund Fixed Income Team [ ]%
- -------------------------------------------------------------------------------------------------------------
Enhanced Income Fund Fixed Income Team [ ]%
- -------------------------------------------------------------------------------------------------------------
Ohio Tax Exempt Bond Fund Tax Free Fixed Income Team [ ]%
- -------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Bond Fund Tax Free Fixed Income Team [ ]%
- -------------------------------------------------------------------------------------------------------------
National Tax Exempt Bond Fund Tax Free Fixed Income Team [ ]%
- -------------------------------------------------------------------------------------------------------------
Ohio Municipal Money Market Fund [ ] [ ]%
- -------------------------------------------------------------------------------------------------------------
Pennsylvania Tax Exempt Money Market
Fund [ ] [ ]%
- -------------------------------------------------------------------------------------------------------------
Tax Exempt Money Market Fund [ ] [ ]%
- -------------------------------------------------------------------------------------------------------------
Money Market Fund [ ] [ ]%
- -------------------------------------------------------------------------------------------------------------
Government Money Market Fund [ ] [ ]%
- -------------------------------------------------------------------------------------------------------------
Treasury Money Market Fund [ ] [ ]%
- -------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund Mid Cap Growth Team Fund has not yet commenced
operations
- -------------------------------------------------------------------------------------------------------------
Large Cap Ultra Fund Large Cap Growth Team Fund has not yet commenced
operations
- -------------------------------------------------------------------------------------------------------------
U.S. Government Income Fund Fixed Income Team Fund has not yet commenced
operations
- -------------------------------------------------------------------------------------------------------------
Michigan Municipal Bond Fund Tax Free Fixed Income Team Fund has not yet commenced
operations
- -------------------------------------------------------------------------------------------------------------
Treasury Plus Money Market Fund [ ] Fund has not yet commenced
operations
- -------------------------------------------------------------------------------------------------------------
</TABLE>
***
PURCHASING, SELLING AND EXCHANGING FUND SHARES
This section tells you how to buy, sell (sometimes called "redeem") or exchange
Class A and Class B Shares of the Funds.
Page 66 of 79
<PAGE>
The classes have different expenses and other characteristics.
CLASS A
- FRONT-END SALES CHARGE
- 12b-1 FEES
- $500 MINIMUM INITIAL INVESTMENT
CLASS B
- CONTINGENT DEFERRED SALES CHARGE
- HIGHER 12b-1 FEES
- $500 MINIMUM INITIAL INVESTMENT
For some investors the minimum initial investment for Class A and Class B Shares
may be lower.
Class A and Class B Shares are for individual and corporate investors.
***
HOW TO PURCHASE FUND SHARES
You may purchase shares directly by:
- Mail,
- Telephone,
- Wire,
- Direct Deposit, or
- Automated Clearing House (ACH).
***
To purchase shares directly from us, please call 1-800-622-FUND (3863), or
complete and send in the enclosed application. Unless you arrange to pay by
wire[** or through direct deposit or ACH/blank **], write your check, payable in
U.S. dollars, to "Armada Funds (Fund name)." The Trust cannot accept third-party
checks, credit cards, credit card checks or cash.
***
You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for their customers. If you
invest through an authorized institution, you will have to follow its
procedures. Your institution may charge a fee for its services, in addition to
the fees charged by the Trust. You will also generally have to address your
correspondence or questions regarding a Fund to your institution.
***
GENERAL INFORMATION
You may purchase shares on any day that the New York Stock Exchange is open for
business (a "Business Day").
The Trust may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Fund or its shareholders.
The price per share (the offering price) will be the net asset value of $1.00
per share (NAV) next determined after a Fund receives your purchase order
plus, in the case of Class A Shares, the applicable front-end sales charge.
The NAV per share of the Armada Money Market and Government Money Market
Funds is calculated first at 3:00 p.m. (Eastern time), then as of the close
of trading of the New York Stock Exchange. The NAV per share of the Armada
Treasury Money Market, Tax Exempt Money Market, Pennsylvania Tax Exempt Money
Market, Ohio Municipal Money Market and Treasury Plus 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 New York Stock Exchange.
Page 67 of 79
<PAGE>
Each bond and equity fund calculates its NAV once each Business Day at the
regularly-scheduled close of normal trading on the New York Stock Exchange
(normally, 4:00 p.m. (Eastern time)). So, for you to receive the current
Business Day's NAV, generally a Fund must receive your purchase order before
4:00 p.m. (Eastern time).
So, for you to be eligible to receive dividends declared on the day you submit
your purchase order, generally a Fund must receive your order before 4:00 p.m.
(Eastern time) and federal funds (readily available funds) before 2:00 p.m.
(Eastern time).
Purchase orders for shares of the Armada Money Market and Government Money
Market Funds which are received by the Transfer Agent by 3:00 p.m. (Eastern
time) are processed that day. Purchase orders for shares of the Armada
Treasury Money Market, Tax Exempt Money Market, Pennsylvania Tax Exempt Money
Market, Ohio Municipal Money Market and Treasury Plus Money Market Funds
which are received by the Transfer Agent by 1:00 p.m. (Eastern time) are also
processed that day.
HOW WE CALCULATE NAV
NAV for one Fund share is the value of that share's portion of all of the assets
in the Fund less liabilities and class expenses.
In calculating NAV, a Fund generally values its investment portfolio at market
price (except the Armada Ohio Municipal Money Market Fund, Armada Pennsylvania
Tax Exempt Money Market Fund, Armada Tax Exempt Money Market Fund, Armada Money
Market Fund, Armada Government Money Market Fund, Armada Treasury Money Market
Fund, and the Armada Treasury Plus Money Market Fund). If market prices are
unavailable or a Fund thinks that they are unreliable, fair value prices may be
determined in good faith using methods approved by the Board of Trustees.
In calculating NAV for the Armada Ohio Municipal Money Market Fund, Armada
Pennsylvania Tax Exempt Money Market Fund, Armada Tax Exempt Money Market Fund,
Armada Money Market Fund, Armada Government Money Market Fund, Armada Treasury
Money Market Fund, and the Armada Treasury Plus Money Market Fund, we generally
value a Fund's investment portfolio using the amortized cost valuation method,
which is described in detail in our Statement of Additional Information. If this
method is determined to be unreliable during certain market conditions or for
other reasons, a Fund may value its portfolio at market price or fair value
prices may be determined in good faith using methods approved by the Board of
Trustees.
Some Funds hold securities that are listed on foreign exchanges. These
securities may trade on weekends or other days when the Funds do not calculate
NAV. As a result, the market value of these Fund's investments may change on
days when you cannot purchase or sell Fund shares.
MINIMUM PURCHASES
***
To purchase shares for the first time, you must invest in any Fund at least:
Page 68 of 79
<PAGE>
<TABLE>
<CAPTION>
CLASS DOLLAR AMOUNT
<S> <C>
Class A Shares $500
Class B Shares $500
</TABLE>
There is no minimum for subsequent investments.
***
[VAR:AUTOMATEDTELEPHONE.NAME]
[VAR:AutomatedTelephone.Name] is a telephone activated service that allows you
to transfer money quickly and easily between the Trust and your National City
Corporation bank account(s). To use [VAR:AutomatedTelephone.Name], you must
first contact your [VAR:Purchasing.Representative.Name] and complete the
[VAR:AutomatedTelephone.Name] application and authorization agreements. Once you
have signed up to use [VAR:AutomatedTelephone.Name], simply call us at
1-800-622-FUND (3863) to complete all of your purchase and redemption
transactions.
PLANNED INVESTMENT PROGRAM
If you have a checking or savings account with a bank, you may purchase Class A
or Class B Shares automatically through regular deductions from your account in
amounts of at least $50 per month.
With a $50 minimum initial investment, you may begin regularly scheduled
investments on a monthly or quarterly basis.
SALES CHARGES
FRONT-END SALES CHARGES -- CLASS A SHARES
The offering price of Class A Shares is the NAV next calculated after a Fund
receives your request, plus the front-end sales load.
The amount of any front-end sales charge included in your offering price varies,
depending on the amount of your investment:
INTERNATIONAL EQUITY, SMALL CAP VALUE, SMALL CAP GROWTH, EQUITY GROWTH, TAX
MANAGED EQUITY, CORE EQUITY, EQUITY INCOME AND MID CAP GROWTH FUNDS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
DEALERS' REALLOWANCE AS
SALES CHARGE AS A % OF AS A % OF NET ASSET A % OF OFFERING PRICE
If your Investment is: OFFERING PRICE PER SHARE VALUE PER SHARE PER SHARE
- ----------------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 5.50 5.80 5.25
- -----------------------------------------------------------------------------------------------------------------------
$25,000 but less than $50,000 5.25 5.50 5.00
- -----------------------------------------------------------------------------------------------------------------------
$50,000 but less than $100,000 4.75 5.00 4.50
- -----------------------------------------------------------------------------------------------------------------------
$100,000 but less than $250,000 3.75 3.90 3.50
- -----------------------------------------------------------------------------------------------------------------------
$250,000 but less than $500,000 3.00 3.10 2.75
- -----------------------------------------------------------------------------------------------------------------------
$500,000 but less than $1,000,000 2.00 2.00 1.75
- -----------------------------------------------------------------------------------------------------------------------
$1,000,000 or more 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 69 of 79
<PAGE>
BALANCED ALLOCATION, TOTAL RETURN ADVANTAGE, BOND, INTERMEDIATE BOND, GNMA,
NATIONAL TAX EXEMPT BOND, U.S. GOVERNMENT INCOME AND MICHIGAN MUNICIPAL BOND
FUNDS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
DEALERS' REALLOWANCE AS
SALES CHARGE AS A % OF AS A % OF NET ASSET A % OF OFFERING PRICE
If your Investment is: OFFERING PRICE PER SHARE VALUE PER SHARE PER SHARE
- ----------------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.75 5.00 4.50
- -----------------------------------------------------------------------------------------------------------------------
$50,000 but less than $100,000 4.00 4.20 3.75
- -----------------------------------------------------------------------------------------------------------------------
$100,000 but less than $250,000 3.75 3.90 3.50
- -----------------------------------------------------------------------------------------------------------------------
$250,000 but less than $500,000 2.50 2.80 2.25
- -----------------------------------------------------------------------------------------------------------------------
$500,000 but less than $1,000,000 2.00 2.00 1.75
- -----------------------------------------------------------------------------------------------------------------------
$1,000,000 or more 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
ENHANCED INCOME FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
DEALERS' REALLOWANCE AS
SALES CHARGE AS A % OF AS A % OF NET ASSET A % OF OFFERING PRICE
If your Investment is: OFFERING PRICE PER SHARE VALUE PER SHARE PER SHARE
- ----------------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 2.75 2.83 2.50
- -----------------------------------------------------------------------------------------------------------------------
$100,000 but less than $250,000 1.75 1.78 1.50
- -----------------------------------------------------------------------------------------------------------------------
$250,000 but less than $500,000 1.00 1.01 0.75
- -----------------------------------------------------------------------------------------------------------------------
$500,000 but less than $1,000,000 0.50 0.50 0.25
- -----------------------------------------------------------------------------------------------------------------------
$1,000,000 or more 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
EQUITY INDEX FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
DEALERS' REALLOWANCE AS
SALES CHARGE AS A % OF AS A % OF NET ASSET A % OF OFFERING PRICE
If your Investment is: OFFERING PRICE PER SHARE VALUE PER SHARE PER SHARE
- ----------------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 3.75 3.90 3.50
- -----------------------------------------------------------------------------------------------------------------------
$100,000 but less than $250,000 2.75 2.83 2.50
- -----------------------------------------------------------------------------------------------------------------------
$250,000 but less than $500,000 2.00 2.04 1.75
- -----------------------------------------------------------------------------------------------------------------------
$500,000 but less than $1,000,000 1.25 1.27 1.00
- -----------------------------------------------------------------------------------------------------------------------
$1,000,000 or more 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
OHIO TAX EXEMPT BOND AND PENNSYLVANIA MUNICIPAL BOND FUNDS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
DEALERS' REALLOWANCE AS
SALES CHARGE AS A % OF AS A % OF NET ASSET A % OF OFFERING PRICE
If your Investment is: OFFERING PRICE PER SHARE VALUE PER SHARE PER SHARE
- ----------------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 3.00 3.09 2.75
- -----------------------------------------------------------------------------------------------------------------------
$100,000 but less than $250,000 2.00 2.04 1.75
- -----------------------------------------------------------------------------------------------------------------------
$250,000 but less than $500,000 1.50 1.52 1.25
- -----------------------------------------------------------------------------------------------------------------------
$500,000 but less than $1,000,000 1.00 1.01 0.75
- -----------------------------------------------------------------------------------------------------------------------
$1,000,000 or more 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 70 of 79
<PAGE>
WAIVER OF FRONT-END SALES CHARGE -- CLASS A SHARES
***
The front-end sales charge will be waived on Class A Shares purchased:
- - by Trustees and Officers of the Trust and their immediate families;
- - by directors and retired directors of National City Corporation (NCC) or
any of its affiliates and their immediate families, employees and retired
employees of NCC or any of its affiliates and their immediate families and
participants in employee benefit/retirement plans of NCC or any of its
affiliates and their immediate families;
- - by direct transfer or rollover from a qualified plan for which affiliates
of NCC serve as trustee or agent (or certain institutions having
relationships with affiliates of NCC);
- - by investors purchasing through payroll deduction, investors in Armada
Plus account through NCC's Retirement Plan Services or investors investing
through "one stop" networks;
- - by orders placed by qualified broker-dealers, investment advisers or
financial planners who charge a management fee for their services and place
trades for their own account or accounts of clients; and
- - by exchanges from Parkstone B Shares to the Trust's Class A Shares or by
exchanges from Parkstone A Shares to the Trust's Class A Shares. If sales
charge for new shares would be greater than sales charge paid on the
previous shares, the shareholder is responsible for paying the difference.
***
REPURCHASE OF CLASS A SHARES
You may repurchase any amount of Class A Shares of any Fund at NAV (without the
normal front-end sales charge), up to the limit of the value of any amount of
Class A Shares (other than those which were purchased with reinvested dividends
and distributions) that you redeemed within the past
[VAR:SalesCharges.FrontEnd.Repurchase.Waiver.Time]. In effect, this allows you
to reacquire shares that you may have had to redeem, without re-paying the
front-end sales charge. To exercise this privilege, the Fund must receive your
purchase order within [VAR:SalesCharges.FrontEnd.Repurchase.Waiver.Time] of your
redemption. IN ADDITION, YOU MUST NOTIFY THE FUND WHEN YOU SEND IN YOUR PURCHASE
ORDER THAT YOU ARE REPURCHASING SHARES.
Page 71 of 79
<PAGE>
REDUCED SALES CHARGES -- CLASS A SHARES
RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this
right allows you to add the value of the Class A Shares you already own to the
amount that you are currently purchasing. The Fund will combine the value of
your current purchases with the current value of any Class A Shares you
purchased previously for (i) your account, (ii) your spouse's account, (iii) a
joint account with your spouse, or (iv) your minor children's trust or custodial
accounts. A fiduciary purchasing shares for the same fiduciary account, trust or
estate may also use this right of accumulation. The Fund will only consider the
value of Class A Shares purchased previously that were sold subject to a sales
charge. TO BE ENTITLED TO A REDUCED SALES CHARGE BASED ON SHARES ALREADY OWNED,
YOU MUST ASK US FOR THE REDUCTION AT THE TIME OF PURCHASE. You must provide the
Fund with your account number(s) and, if applicable, the account numbers for
your spouse and/or children (and provide the children's ages). The Fund may
amend or terminate this right of accumulation at any time.
LETTER OF INTENT. You may purchase Class A Shares at the sales charge rate
applicable to the total amount of the purchases you intend to make over a
13-month period. In other words, a Letter of Intent allows you to purchase Class
A Shares of a Fund over a 13-month period and receive the same sales charge as
if you had purchased all the shares at the same time. The Fund will only
consider the value of Class A Shares sold subject to a sales charge. As a
result, shares of the Class A Shares purchased with dividends or distributions
will not be included in the calculation. To be entitled to a reduced sales
charge based on shares you intend to purchase over the 13-month period, you must
send the Fund a Letter of Intent. In calculating the total amount of purchases
you may include in your letter purchases made up to 90 days before the date of
the Letter. The 13-month period begins on the date of the first purchase,
including those purchases made in the 90-day period before the date of the
Letter. Please note that the purchase price of these prior purchases will not be
adjusted.
If you do not purchase the [number/dollar amount] of shares indicated in the
Letter, the Letter authorizes the Fund to hold in escrow 4% of the total amount
you intend to purchase. If you do not complete the total intended purchase at
the end of the 13-month period, the Fund's transfer agent will redeem the
necessary portion of the escrowed shares to make up the difference between the
reduced rate sales charge (based on the amount you intended to purchase) and the
sales charge that would normally apply (based on the actual amount you
purchased).
COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate
sales charge rate, the Fund will combine same day purchases of Class A Shares
(that are subject to a sales charge) made by you, your spouse and your minor
children (under age 21). This combination also applies to Class A Shares you
purchase with a Letter of Intent.
Page 72 of 79
<PAGE>
CONTINGENT DEFERRED SALES CHARGES -- CLASS B SHARES
You do not pay a sales charge when you purchase Class B Shares. The offering
price of Class B Shares is simply the next calculated NAV. But if you sell your
shares within five years after your purchase, you will pay a contingent deferred
sales charge as described in the table below for either (1) the NAV of the
shares at the time of purchase, or (2) NAV of the shares next calculated after
the Fund receives your sale request, whichever is less. The sales charge does
not apply to shares you purchase through reinvestment of dividends or
distributions. So, you never pay a deferred sales charge on any increase in your
investment above the initial offering price. This sales charge does not apply to
exchanges of Class B Shares of one Fund for Class B Shares of another Fund.
After eight years, your Class B Shares are converted to Class A Shares.
<TABLE>
<CAPTION>
** CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE OF
YEARS SINCE PURCHASE DOLLAR AMOUNT SUBJECT TO CHARGE
- ------------------------------------------------------------------------------
<S> <C>
FIRST 5.0%
SECOND 5.0%
THIRD 4.0%
FOURTH 3.0%
FIFTH 2.0%
SIXTH NONE
SEVENTH NONE
EIGHTH NONE
</TABLE>
The contingent deferred sales charge will be waived if you sell your Class B
Shares for the following reasons:
- - redemptions following the death or disability of a shareholder;
- - redemptions representing a minimum required distribution from an IRA or a
custodial account to a shareholder who has reached 70 1/2 years of age;
- - minimum required distribution from an IRA or a custodial account to a
shareholder who has died or become disabled;
- - redemptions by participants in a qualified plan for retirement loans,
financial hardship, certain participant expenses and redemptions due to
termination of employment with plan sponsor;
- - redemptions by a settlor of a living trust;
- - redemptions effected pursuant to a Fund's right to liquidate a
shareholder's account if the value of shares held in the account is less
than the minimum account size;
- - return of excess contributions;
- - redemptions following the death or disability of both shareholders in the
case of joint accounts; and
- - exchanges from the Trust's B Shares.
GENERAL INFORMATION ABOUT SALES CHARGES
Your securities dealer is paid a commission when you buy your shares and is paid
a servicing fee as long as you hold your shares. Your securities dealer or
servicing agent may receive different levels of compensation depending on which
Class of shares you buy.
From time to time, some financial institutions [*VAR:,including brokerage firms
affiliated with the [** Advisor/Adviser/Distributor **], may be reallowed up to
the entire sales charge. Firms that receive a reallowance of the entire sales
charge may be considered underwriters for the purpose of federal securities law.
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor from any sales charge it receives or from any other source available
to it. Under any such program, the Distributor may provide incentives, in the
form of cash or other compensation, including merchandise, airline vouchers,
trips and vacation packages, to dealers selling shares of the Funds.
HOW TO SELL YOUR FUND SHARES
Holders of Class A or B Shares may sell shares by following procedures
established when they opened their account or accounts. If you have questions,
call 1-800-622-FUND (3863).
If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares.
If you own your shares directly, you may sell (sometimes called "redeem") your
shares on any Business Day by contacting a Fund directly by mail or telephone at
1-800-622-FUND (3863). The minimum amount for telephone redemptions is
$[VAR:Selling.Direct.TelephoneMin].
If you would like to sell $10,000 or more of your shares, please notify the Fund
in writing and include a signature guarantee by a bank or other financial
institution (a notarized signature is not sufficient).
The sale price of each share will be the next NAV determined after the Fund
receives your request less, in the case of Class B Shares, any applicable
deferred sales charge.
SYSTEMATIC WITHDRAWAL PLAN
If you have at least $1,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals of at least $100 from any Fund. The proceeds of
each withdrawal will be mailed to you by check or, if you have a checking or
savings account with a bank, electronically transferred to your account.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within seven Business Days after we
receive your request. Your proceeds can be wired to your bank account or sent to
you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK [VAR: OR THROUGH
ACH], REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED
(WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE).
Page 73 of 79
<PAGE>
REDEMPTIONS IN KIND
We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Fund's remaining shareholders) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). It is highly unlikely that your shares would ever be
redeemed in kind, but if they were you would probably have to pay transaction
costs to sell the securities distributed to you, as well as taxes on any capital
gains from the sale as with any redemption.
INVOLUNTARY SALES OF YOUR SHARES
***
If your account balance drops below $500 because of redemptions you may be
required to sell your shares. But, we will always give you at least 60 days'
written notice to give you time to add to your account and avoid the sale of
your shares.
***
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
The Fund may suspend your right to sell your shares if the New York Stock
Exchange restricts trading, the SEC declares an emergency or for other reasons.
More information about this is in our Statement of Additional Information.
HOW TO EXCHANGE YOUR SHARES
You may exchange your shares on any Business Day by contacting us directly by
mail or telephone.
You may also exchange shares through your financial institution by mail or
telephone. Exchange requests must be for an amount of at least
$[VAR:Exchange.General.Min].
You may exchange your shares up to [VAR:Exchange.MaxPerYear] times during a
calendar year. If you exchange your shares more than
[VAR:Exchange.General.TransactionLimit] times during a year, you may be charged
a $[VAR:Exchange.General.ExtraExchangeFee] fee for each additional exchange. You
will be notified before any fee is charged.
IF YOU RECENTLY PURCHASED SHARES BY CHECK[VAR: OR THROUGH ACH], YOU MAY NOT BE
ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO
15 DAYS FROM YOUR DATE OF PURCHASE). This exchange privilege may be changed or
canceled at any time upon [** Exchange.CancelNotice **] days' notice.
When you exchange shares, you are really selling your shares and buying other
Fund shares. So, your sale price and purchase price will be based on the NAV
next calculated after the Fund receives your exchange request.
CLASS A SHARES
You may exchange Class A Shares of any Fund for Class A Shares of any other
Fund. If you exchange shares that you purchased without a sales charge or with a
lower sales charge into a Fund with a sales charge or with a higher sales
charge, the exchange is subject to an incremental sales charge (e.g., the
difference between the lower and higher applicable sales charges). If you
exchange shares into a Fund with the same, lower or no sales charge there is no
incremental sales charge for the exchange.
CLASS B SHARES
You may exchange Class B Shares of any Fund for Class B Shares of any other Fund
[VAR:_or_for_shares_of_the_Money_Market_Funds]. No contingent deferred sales
charge is imposed on redemptions of shares you acquire in an exchange, provided
you hold your shares for at least five years from your initial purchase.
TELEPHONE TRANSACTIONS
Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although the Trust has certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, the Trust is not responsible for any losses or costs incurred by
following telephone instructions we reasonably believe to be genuine. If you or
your financial institution transact with the Fund over the telephone, you will
generally bear the risk of any loss.
DISTRIBUTION OF FUND SHARES
Each Fund has adopted a distribution plan [under Rule 12b-1, pursuant to the
1940 Act, as amended] that allows each Fund to pay distribution and service fees
for the sale and distribution of its shares, and for services provided to
shareholders. Because these fees are paid out of a Fund's assets continuously,
over time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
Page 74 of 79
<PAGE>
Distribution fees, as a percentage of average daily net assets are as follows:
<TABLE>
<S> <C>
Armada International Equity Fund ______%
Armada Small Cap Value Fund ______%
Armada Small Cap Growth Fund ______%
Armada Equity Growth Fund ______%
Armada Tax Managed Equity Fund ______%
Armada Core Equity Fund ______%
Armada Equity Index Fund ______%
Armada Equity Income Fund ______%
Armada Balanced Allocation Fund ______%
Armada Total Return Advantage Fund ______%
Armada Bond Fund ______%
Armada Intermediate Bond Fund ______%
Armada GNMA Fund ______%
Armada Enhanced Income Fund ______%
Armada Ohio Tax Exempt Bond Fund ______%
Armada Pennsylvania Municipal Bond Fund ______%
Armada National Tax Exempt Bond Fund ______%
Armada Ohio Municipal Money Market Fund ______%
Armada Pennsylvania Tax Exempt Money Market Fund ______%
Armada Tax Exempt Money Market Fund ______%
Armada Money Market Fund ______%
Armada Government Money Market Fund ______%
Armada Treasury Money Market Fund ______%
Armada Mid Cap Growth Fund Not yet in operation
Armada Large Cap Ultra Fund Not yet in operation
Armada U.S. Government Income Fund Not yet in operation
Armada Michigan Municipal Bond Fund Not yet in operation
Armada Treasury Plus Money Market Fund Not yet in operation
</TABLE>
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor from any sales charge it receives or from any other source available
to it. Under any such program, the Distributor may provide incentives, in the
form of cash or other compensation, including merchandise, airline vouchers,
trips and vacation packages, to dealers selling shares of a Fund.
Page 75 of 79
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes its income as follows:
<TABLE>
<S> <C>
Armada International Equity Fund Annually
Armada Small Cap Value Fund Annually
Armada Small Cap Growth Fund Annually
Armada Equity Growth Fund Quarterly
Armada Tax Managed Equity Fund Quarterly
Armada Core Equity Fund Quarterly
Armada Equity Index Fund Quarterly
Armada Equity Income Fund Quarterly
Armada Balanced Allocation Fund Quarterly
Armada Total Return Advantage Fund Monthly
Armada Bond Fund Monthly
Armada Intermediate Bond Fund Monthly
Armada GNMA Fund Monthly
Armada Enhanced Income Fund Monthly
Armada Ohio Tax Exempt Bond Fund Monthly
Armada Pennsylvania Municipal Bond Fund Monthly
Armada National Tax Exempt Bond Fund Monthly
Armada Ohio Municipal Money Market Fund Monthly
Armada Pennsylvania Tax Exempt Money Market Fund Monthly
Armada Tax Exempt Money Market Fund Monthly
Armada Money Market Fund Monthly
Armada Government Money Market Fund Monthly
Armada Treasury Money Market Fund Monthly
Armada Mid Cap Growth Fund Not yet in operation
Armada Large Cap Ultra Fund Not yet in operation
Armada U.S. Government Income Fund Not yet in operation
Armada Michigan Municipal Bond Fund Not yet in operation
Armada Treasury Plus Money Market Fund Not yet in operation
</TABLE>
Each Fund makes distributions of capital gains, if any, at least annually. If
you own Fund shares on a Fund's record date, you will be entitled to receive the
distribution.
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Fund in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the Fund
receives your written notice. To cancel your election, simply send the Fund
written notice.
TAXES
FEDERAL TAXES
Each Fund contemplates declaring as dividends each year all or substantially
all of its taxable income, including its net capital gain (the excess of
long-term capital gain over shart-term capital loss). Distributions
attributable to the net capital gain of a Fund will be taxable to you as
long-term capital gain, regardless of how long you have held your shares.
Other Fund distributions (other than exempt-interest dividends, discussed
below) will generally be taxable as ordinary income. You will be subject to
income tax on Fund distributions regardless of whether they are paid in cash
or reinvested in additional shares. You will be notified annually of the tax
status of distributions to you.
In the case of any Fund other than a money-market Fund, you should note that
if you purchase shares just before a distribution, the purchase price will
reflect the amount of the upcoming distribution, but you will be taxable on
the entire amount of the distribution received, even though, as an economic
matter, the distribution simply constitutes a return of capital. This is
known as "buying into a dividend."
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund, based on the
difference between your tax basis in the shares and the amount you receive
for them. (To aid in computing your tax basis, you generally should retain
your account statements for the periods during which you held shares.) Any
loss realized on shares held for six months or less will be treated as a
long-term capital loss to the extent of any capital gain dividends that were
received on the shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other
tax-qualified plan) will not be currently taxable.
It is expected that the Armada International Equity Fund will be subject to
foreign withholding taxes with respect to dividends or interest received from
sources in foreign countries. The Armada International Equity Fund may make
an election to treat a proportionate amount of such taxes as constituting a
distribution to each shareholder, which would allow each shareholder either
(1) to credit such proportionate amount of taxes against U.S. federal income
tax liability or (2) to take such amount as an itemized deduction.
The Armada Tax Exempt Money Market Fund, Armada Pennsylvania Tax Exempt Money
Market Fund, Armada Ohio Municipal Money Market Fund, Armada Ohio Tax Exempt
Bond Fund, Armada Pennsylvania Municipal Bond Fund, Armada National Tax
Exempt Bond Fund, and Armada Michigan Municipal Bond Fund (the "Tax-Exempt
Funds") anticipate that substantially all of their income dividends will be
"exempt interest dividends," which are exempt from federal income taxes.
However, some dividends will be taxable, such as dividends that are derived
from occasional taxable investments, and in the case of other than money
market Funds, distributions of short and long-term capital gains. Interest
on indebtedness incurred by a shareholder to purchase or carry shares of any
Tax-Exempt Fund generally will not be deductible for federal income tax
purposes.
You should note that a portion of the exempt-interest dividends paid by the
Tax-Exempt Funds may constitute an item of tax preference for purposes of
determining federal alternative minimum tax liability. Exempt-interest
dividends will also be considered along with other adjusted gross income in
determining whether any Social Security or railroad retirement payments
received by you are subject to federal income taxes.
If you receive an exempt-interest dividend with respect to any share and the
share is held by you for six months or less, any loss on the sale or
exchange of the share will be disallowed to the extent of such dividend
amount.
The foregoing is only a summary of certain tax considerations under current
law, which may be subject to change in the future. Shareholders who are
nonresident aliens, foreign trusts or estates, or foreign corporations or
partnerships, may be subject to different United States federal income tax
treatment. You should consult your tax adviser for further information
regarding federal, state, local and/or foreign tax consequences relavant to
your specific situation.
STATE AND LOCAL TAXES
Shareowners may also be subject to state and local taxes on distributions and
redemptions. State income taxes may not apply, however, to the portions of
each Fund's distributions, if any, that are attributable to interest on
Federal Securities or interest on securities of the particular state or
localities within the state. The Armada Pennsylvania Tax Exempt Money Market
Fund and Armada Pennsylvania Municipal Bond Fund intend to distrubute income
that is exempt from Pennsylvania personal income taxes. The Armada Ohio Tax
Exempt Bond Fund and Armada Ohio Municipal Money Market Fund intend to
distribute income that is exempt from Ohio personal income taxes. The Armada
Michigan Municipal Bond Fund intends to distribute income that is exempt from
Michigan income taxes. Shareowners should consult their tax advisers
regarding the tax status of distributions in their state and locality.
Each Fund may invest a portion of its assets in securities that generate
taxable income for federal or state income taxes. Income exempt from federal
tax may be subject to state and local taxes. Any capital gains distributed
by these Funds may be taxable.
The Funds use a tax management technique known as "highest in, first out."
Using this technique, the portfolio holdings that have experienced the
smallest gain or largest loss are sold first in an effort to minimize capital
gains and enhance after-tax returns.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
Page 76 of 79
<PAGE>
FINANCIAL HIGHLIGHTS
The tables that follows presents performance information about Class A and Class
B Shares of each Fund. This information is intended to help you understand each
Fund's financial performance for the past five years, or, if shorter, the period
of the Fund's operations. Some of this information reflects financial
information for a single Fund share. The total returns in the table represent
the rate that you would have earned (or lost) on an investment in a Fund,
assuming you reinvested all of your dividends and distributions. This
information has been audited by Ernst & Young LLP, independent public
accountants. Their report, along with each Fund's financial statements, appears
in the annual report that accompanies our Statement of Additional Information.
You can obtain the annual report, which contains more performance information,
at no charge by calling 1-800-622-FUND (3863).
Page 77 of 79
<PAGE>
ARMADA FUNDS
INVESTMENT ADVISER
National City Investment Management Company
1900 East Ninth Street
Cleveland, Ohio 44114
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
LEGAL COUNSEL
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103-6996
More information about the Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated September __, 1999, includes detailed information about the Armada
Funds. The SAI is on file with the SEC and is incorporated by reference into
this prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list each Fund's holdings and contain information from the Fund's
managers about strategies, and recent market conditions and trends. The reports
also contain detailed financial information about the Funds.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE: Call 1-800-622-FUND (3863)
BY MAIL: Write to us
P.O. Box 8421
Boston, MA 02266-8421
BY E-MAIL: [VAR:FUND.EMAILADDRESS]
BY INTERNET: WWW.ARMADAFUNDS.COM
Page 78 of 79
<PAGE>
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about the Armada Funds, from the SEC's website
("http://www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009. The Armada Fund's Investment Company Act registration
number is 811-4416.
Page 79 of 79
<PAGE>
ARMADA FUNDS
CLASS I SHARES
PROSPECTUS
SEPTEMBER ___, 1999
ARMADA INTERNATIONAL EQUITY FUND
ARMADA SMALL CAP VALUE FUND
ARMADA SMALL CAP GROWTH FUND
ARMADA EQUITY GROWTH FUND
ARMADA TAX MANAGED EQUITY FUND
ARMADA CORE EQUITY FUND
ARMADA EQUITY INDEX FUND
ARMADA EQUITY INCOME FUND
ARMADA BALANCED ALLOCATION FUND
ARMADA TOTAL RETURN ADVANTAGE FUND
ARMADA BOND FUND
ARMADA INTERMEDIATE BOND FUND
ARMADA GNMA FUND
ARMADA ENHANCED INCOME FUND
ARMADA OHIO TAX EXEMPT BOND FUND
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
ARMADA NATIONAL TAX EXEMPT BOND FUND
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
ARMADA TAX EXEMPT MONEY MARKET FUND
ARMADA MONEY MARKET FUND
ARMADA GOVERNMENT MONEY MARKET FUND
ARMADA TREASURY MONEY MARKET FUND
ARMADA MID CAP GROWTH FUND
ARMADA LARGE CAP ULTRA FUND
ARMADA U.S. GOVERNMENT INCOME FUND
ARMADA MICHIGAN MUNICIPAL BOND FUND
ARMADA TREASURY PLUS MONEY MARKET FUND
INVESTMENT ADVISER
NATIONAL CITY INVESTMENT MANAGEMENT COMPANY
INVESTMENT SUB-ADVISER
NATIONAL ASSET MANAGEMENT CORPORATION
(ARMADA CORE EQUITY FUND AND
ARMADA TOTAL RETURN ADVANTAGE FUND)
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED ANY FUND SHARES OR
DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.
Page 1 of 70
<PAGE>
HOW TO READ THIS PROSPECTUS
The Armada Funds (the Trust) is a mutual fund family that offers different
classes of shares in separate investment portfolios (Funds). The Funds have
individual investment goals and strategies. This prospectus gives you important
information that you should know about the Class I Shares of the Funds before
investing. Please read this prospectus and keep it for future reference.
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN EASILY
REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT THE FUNDS. FOR MORE DETAILED INFORMATION ABOUT
EACH FUND, PLEASE SEE:
PAGE
ARMADA INTERNATIONAL EQUITY FUND.................................XXX
ARMADA SMALL CAP VALUE FUND......................................XXX
ARMADA SMALL CAP GROWTH FUND.....................................XXX
ARMADA EQUITY GROWTH FUND........................................XXX
ARMADA TAX MANAGED EQUITY FUND...................................XXX
ARMADA CORE EQUITY FUND..........................................XXX
ARMADA EQUITY INDEX FUND.........................................XXX
ARMADA EQUITY INCOME FUND........................................XXX
ARMADA BALANCED ALLOCATION FUND..................................XXX
ARMADA TOTAL RETURN ADVANTAGE FUND...............................XXX
ARMADA BOND FUND.................................................XXX
ARMADA INTERMEDIATE BOND FUND....................................XXX
ARMADA GNMA FUND.................................................XXX
ARMADA ENHANCED INCOME FUND......................................XXX
ARMADA OHIO TAX EXEMPT BOND FUND.................................XXX
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND..........................XXX
ARMADA NATIONAL TAX EXEMPT BOND FUND.............................XXX
ARMADA OHIO MUNICIPAL MONEY MARKET FUND..........................XXX
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND.................XXX
ARMADA TAX EXEMPT MONEY MARKET FUND..............................XXX
ARMADA MONEY MARKET FUND.........................................XXX
ARMADA GOVERNMENT MONEY MARKET FUND..............................XXX
ARMADA TREASURY MONEY MARKET FUND................................XXX
ARMADA MID CAP GROWTH FUND.......................................XXX
ARMADA LARGE CAP ULTRA FUND......................................XXX
ARMADA U.S. GOVERNMENT INCOME FUND...............................XXX
ARMADA MICHIGAN MUNICIPAL BOND FUND..............................XXX
ARMADA TREASURY PLUS MONEY MARKET FUND...........................XXX
MORE INFORMATION ABOUT RISK......................................XXX
EACH FUND'S OTHER INVESTMENTS....................................XXX
THE INVESTMENT ADVISER, SUB-ADVISER AND
INVESTMENT TEAM..............................................XXX
PURCHASING, SELLING AND EXCHANGING FUND SHARES...................XXX
DIVIDENDS, DISTRIBUTIONS AND TAXES...............................XXX
FINANCIAL HIGHLIGHTS.............................................XXX
HOW TO OBTAIN MORE INFORMATION ABOUT THE
ARMADA FUNDS.................................................Back Cover
Page 2 of 70
<PAGE>
INTRODUCTION
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.
Each Fund has its own investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help a
Fund achieve its goal. Still, investing in each Fund involves risk and there is
no guarantee that a Fund will achieve its goal. An investment manager's
judgments about the markets, the economy, or companies may not anticipate actual
market movements, economic conditions or company performance, and these
judgments may affect the return on your investment. In fact, no matter how good
a job an investment manager does, you could lose money on your investment in a
Fund, just as you could with other investments. An investment in a Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation (FDIC) or any government agency. In addition, although a
money market fund seeks to keep a constant price per share of $1.00, there is no
guarantee that a money market fund will achieve this goal and it is possible
that you may lose money by investing in the Fund.
The value of your investment in a Fund (other than a money market fund) is based
on the market value of the securities the Fund holds. These prices change daily
due to economic and other events that affect particular companies and other
issuers. These price movements, sometimes called volatility, may be greater or
lesser depending on the types of securities a Fund owns and the markets in which
they trade. The effect on a Fund of a change in the value of a single security
will depend on how widely the Fund diversifies its holdings.
Page 3 of 70
<PAGE>
ARMADA INTERNATIONAL EQUITY FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Equity securities of foreign issuers
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in equity securities of
issuers located in at least three
foreign countries
INVESTOR PROFILE Investors seeking capital
appreciation, who are willing to
accept the risks of foreign investing
***
INVESTMENT STRATEGY OF THE ARMADA INTERNATIONAL EQUITY FUND
***
The Armada International Equity Fund's investment objective is to provide
capital appreciation by investing in a portfolio of equity securities
consistent with reasonable investment risk. The investment objective may be
changed without a shareholder vote. The Fund will normally invest at least
80% of its total assets in the equity securities of foreign issuers. The Fund
focuses on issuers included in the Morgan Stanley Capital International
Europe, Australia, Far East (World EAFE) Index. The Adviser determines the
appropriate distribution of investments among countries using criteria such
as relative valuation, growth prospects and fiscal, monetary and regulatory
government policies. Within foreign markets, the Adviser buys and sells
securities based on its analysis of issuers' competitive position and
valuation.
Due to its investment strategy, the Fund may buy and sell securities
frequently. This may result in higher transaction costs and additional
capital gains tax liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA INTERNATIONAL EQUITY FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, international
equity securities, may underperform other equity market segments or the equity
market as a whole.
Page 4 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE MORGAN STANLEY EAFE INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- -----------------------------------------------------------------------
<S> <C> <C>
ARMADA INTERNATIONAL EQUITY FUND X.XX% X.XX%*
MORGAN STANLEY EAFE INDEX X.XX% X.XX%**
</TABLE>
* Since August 1, 1997
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- ----------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
---
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- -------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada International Equity Fund -- Class I Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 5 of 70
<PAGE>
ARMADA SMALL CAP VALUE FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Small cap equity securities
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in value-oriented equity
securities of smaller issuers
INVESTOR PROFILE Investors seeking capital
appreciation, who are willing to
accept the risk of share price
volatility that may accompany small
cap investing
***
INVESTMENT STRATEGY OF THE ARMADA SMALL CAP VALUE FUND
***
The Armada Small Cap Value Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded small
cap equity securities. The investment objective may be changed without a
shareholder vote. The Fund will normally invest at least 80% of its total assets
in securities of companies with small stock market capitalizations. The Fund may
invest up to 20% of its total assets at the time of purchase in foreign
securities. In buying and selling securities for the Fund, the Adviser uses a
value-oriented approach. The Adviser seeks to invest in equity securities based
upon price/earnings, price/book and price cash/flow ratios which are lower than
the market averages. The Adviser also may consider private market value, balance
sheet strength and long term earnings potential buying and selling.
The Fund considers a small capitalization or "small cap" company to be one that
has a comparable market capitalization as the companies in the Russell 2000
Value Index.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA SMALL CAP VALUE FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The smaller capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
Therefore, small cap stocks may be more volatile than those of larger companies.
These securities may be traded over-the-counter or listed on an exchange and may
or may not pay dividends.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, small cap equity
securities, may underperform other equity market segments or the equity market
as a whole.
Page 6 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I from year
to year.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE RUSSELL 2000 VALUE INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------
<S> <C> <C>
ARMADA SMALL CAP VALUE FUND X.XX% X.XX%*
RUSSELL 2000 VALUE INDEX X.XX% X.XX%**
</TABLE>
* Since July 26, 1994
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- ------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Small Cap Value Fund - Class I Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 7 of 70
<PAGE>
ARMADA SMALL CAP GROWTH FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Small cap equity securities
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in growth-oriented equity
securities of small issuers
INVESTOR PROFILE Investors seeking capital
appreciation, who are willing to
accept the risk of share price
volatility that may accompany small
cap investing
***
INVESTMENT STRATEGY OF THE ARMADA SMALL CAP GROWTH FUND
***
The Armada Small Cap Growth Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded small
cap equity securities. The investment objective may be changed without a
shareholder vote. The Fund normally invests at least 80% of its total assets
in securities of companies with small stock market capitalizations. The Fund
may invest up to 20% of its total assets at the time of purchase in foreign
securities. In buying and selling securities for the Fund, the Adviser
considers factors such as participation in a fast growing industry, a
strategic niche in a specialized market and fundamental value. The Adviser
also may consider price, trading volume and bid-ask spreads.
The Fund considers a small capitalization or "small cap" company as one that has
a comparable market capitalization as the companies in the Russell 2000 Growth
Index.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA SMALL CAP GROWTH FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The smaller capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
Therefore, small cap stocks may be more volatile than those of larger companies
may. These securities may be traded over-the-counter or listed on an exchange
and may or may not pay dividends.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, small cap equity
securities, may underperform other equity market segments or the equity market
as a whole.
Page 8 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF RUSSELL 2000 GROWTH INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- ----------------------------------------------------------------------
<S> <C> <C>
ARMADA SMALL CAP GROWTH FUND X.XX% X.XX%*
RUSSELL 2000 GROWTH INDEX X.XX% X.XX%**
</TABLE>
* Since August 1, 1997
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- -------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- -------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Small Cap Growth Fund -- Class I Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 9 of 70
<PAGE>
ARMADA EQUITY GROWTH FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Large cap equity securities
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in growth oriented common
stocks of larger issuers
INVESTOR PROFILE Investors seeking capital appreciation
and who are willing to accept the risk
of investing in equity securities
***
INVESTMENT STRATEGY OF THE ARMADA EQUITY GROWTH FUND
***
The Armada Equity Growth Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded
larger cap equity securities. The investment objective may be changed without
shareholder vote. The Fund will normally invest at least 80% of its total
assets in a diversified portfolio of common stocks and securities convertible
into common stocks of companies with large stock market capitalization. The
Fund may invest up to 20% of its total assets at the time of purchase in
foreign securities. In buying and selling securities for the Fund, the
Adviser considers factors such as historical and projected earnings growth,
earnings quality and liquidity. The Fund generally purchases common stocks
that are listed on a national securities exchange or unlisted securities with
an established over-the-counter market.
The Fund considers a large capitalization or "large cap" company to be one
that has a comparable market capitalization as the companies in the S&P 500
Index.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA EQUITY GROWTH FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, large cap equity
securities, may underperform other equity market segments or the equity market
as a whole.
Page 10 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1991 X.XX%
1992 X.XX%
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARMADA EQUITY GROWTH FUND X.XX% X.XX% X.XX% X.XX%*
S&P 500 INDEX X.XX% X.XX% X.XX% X.XX%**
</TABLE>
* Since April 15, 1991
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Equity Growth Fund -- Class I Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 11 of 70
<PAGE>
ARMADA TAX MANAGED EQUITY FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation, while minimizing
the impact of taxes
INVESTMENT FOCUS Equity securities
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in common stock using
strategies designed to minimize the
impact of taxes
INVESTOR PROFILE Investors who are seeking capital
appreciation while minimizing the
impact of taxes and who are willing
to accept the risk of investing in
equity securities
***
INVESTMENT STRATEGY OF THE ARMADA TAX MANAGED EQUITY FUND
***
The Armada Tax Managed Equity Fund's investment objective is to provide
capital appreciation while minimizing the impact of taxes on shareholders'
returns. The investment objective may be changed without a shareholder vote.
The Fund normally invests at least 80% of the Fund's total assets in common
stocks. The Fund may invest up to 20% of its total assets at the time of
purchase in foreign securities. The Adviser buys and sells common stocks
based on factors such as historical and projected long-term earnings growth,
earnings quality and liquidity. The Adviser attempts to minimize the
realization of taxable gains by investing in the securities of companies with
above average earnings predictability and stability which the Fund expect to
hold for several years. This generally results in a low level of portfolio
turnover. In addition, the Fund seeks to distribute relatively low levels of
taxable investment income by investing in stocks with low dividend yields.
The Fund is not a tax-exempt fund, and it expects to distribute taxable
dividends and capital gains from time to time.
[Large redemptions to be funded with appreciated securities?]
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA TAX MANAGED EQUITY FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, large cap equity
securities, may underperform other equity market segments or the equity market
as a whole.
Page 12 of 70
<PAGE>
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it has not completed a full calendar year of operations.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
Class I Shares
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Tax Managed Equity Fund -- Class I Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 13 of 70
<PAGE>
ARMADA CORE EQUITY FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Large cap common stocks
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in large capitalization
INVESTOR PROFILE Investors seeking capital
appreciation, who are willing to
accept the risk of investing in equity
securities
***
INVESTMENT STRATEGY OF THE ARMADA CORE EQUITY FUND
***
The Armada Core Equity Fund's investment objective is to provide capital
appreciation by blending value and growth investment styles. The investment
objective may be changed without a shareholder vote. The Fund invests in a
diversified portfolio of domestic and foreign common stocks of issuers with
large market capitalizations. The Sub-Adviser normally buys and sells between
20% and 50% of the Fund's assets in each of three primary groups of equity
securities: common stocks that the Adviser believes have strong growth
potential, common stocks that the Adviser believes are undervalued, and common
stocks that offer above-average yields. The Fund may invest up to 20% of its
total assets at the time of purchase in foreign securities
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA CORE EQUITY FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, large cap equity
securities, may underperform other equity market segments or the equity market
as a whole.
Page 14 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE S&P 500 INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------
<S> <C> <C>
ARMADA CORE EQUITY FUND X.XX% X.XX%*
S&P 500 INDEX X.XX% X.XX%**
</TABLE>
* Since August 1, 1997
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Core Equity Fund -- Class I Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 15 of 70
<PAGE>
ARMADA EQUITY INDEX FUND
FUND SUMMARY
***
INVESTMENT GOAL To approximate, before Fund expenses,
the investment results of the S&P 500
Index
INVESTMENT FOCUS Common stocks of larger issuers
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in stocks that comprise the
S&P 500 Index
INVESTOR PROFILE Investors seeking returns similar to
the S&P 500, who are willing to accept
the risk of investing in equity
securities
***
INVESTMENT STRATEGY OF THE ARMADA EQUITY INDEX FUND
***
The Armada Equity Index Fund's investment objective is to provide investment
results that, before Fund expenses, approximate the aggregate price and
dividend performance of the securities included in the S&P 500 Index by
investing in securities comprising the S&P 500 Index. The investment
objective may be changed without a shareholder vote. The S&P 500 Index is
made up of common stocks of 500 large, publicly traded companies. The Fund
may also invest in derivative instruments, such as futures, designed to
replicate the performance of the S&P 500 Index. The Fund's ability to
duplicate the performance of the S&P 500 Index will depend to some extent on
the size and timing of cash flows into and out of the Fund, as well as on the
level of the Fund's expenses. The Adviser makes no attempt to "manage" the
Fund in the traditional sense (i.e., by using economic, financial or market
analyses).
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA EQUITY INDEX FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The Fund is also subject to the risk that its market segment, the S&P 500 Index
of common stocks, may underperform other equity market segments or the equity
market as a whole.
Page 16 of 70
<PAGE>
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it has not completed a full calendar year of operations.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Equity Index Fund -- Class I Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
$XXX $XXX
Page 17 of 70
<PAGE>
ARMADA EQUITY INCOME FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Income producing equity securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in equity securities that
provide a higher yield than the
general market
INVESTOR PROFILE Investors seeking an income component
as well as capital appreciation and
who are willing to accept the risk of
investing in equity securities
***
INVESTMENT STRATEGY OF THE ARMADA EQUITY INCOME FUND
***
The Armada Equity Income Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded
equity securities which, in the aggregate, provide a premium current yield.
The Fund normally invest at least 80% of its total assets in common stocks
and securities convertible into common stocks of companies that have the
ability to pay above-average dividends. The Fund may invest up to 20% of its
total assets at the time of purchase in foreign securities. The investment
objective may be changed without a shareholder vote. In buying and selling
securities for the Fund, the Adviser emphasizes equity securities that
provide a higher yield than the general market. The Fund will generally sell
securities when their yields approach a market yield or they otherwise fail
to satisfy investment criteria.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA EQUITY INCOME FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, income producing
equity securities, may underperform other equity market segments or the equity
market as a whole.
Page 18 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE S&P BARRA/VALUE INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- ---------------------------------------------------------------------------
<S> <C> <C>
ARMADA EQUITY INCOME FUND X.XX% X.XX%*
S&P BARRA/VALUE INDEX X.XX% X.XX%**
</TABLE>
* Since July 1, 1994
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Equity Income Fund -- Class I Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 19 of 70
<PAGE>
ARMADA BALANCED ALLOCATION FUND
FUND SUMMARY
***
INVESTMENT GOAL Long-term capital appreciation
and current income
INVESTMENT FOCUS A combination of growth-oriented
common stocks, convertible securities,
fixed income securities and cash
equivalents
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in a diversified portfolio
of growth-oriented common stocks,
convertible securities, investment
grade fixed income securities and
cash equivalents
INVESTOR PROFILE Investors seeking a broad
diversification by asset class and
style to manage risk and provide the
potential for above-average after-tax
returns
***
INVESTMENT STRATEGY OF THE ARMADA BALANCED ALLOCATION FUND
***
The Armada Balanced Allocation Fund's investment objective is to provide
long-term capital appreciation and current income. The investment objective
may be changed without a shareholder vote. The Fund intends to invest 50% to
70% of its net assets in common stocks and convertible securities, 25% to 55%
of its net assets in fixed income securities and up to 30% of its net assets
in cash and cash equivalent securities. The Adviser buys and sells equity
securities based on their potential for long-term capital appreciation. The
Fund invests the fixed income portion of its portfolio of investments in a
broad range of investment grade debt securities (which are those rated at the
time of investment in one of the four highest rating categories by a major
rating agency). The cash equivalent securities in which the Fund normally
invests are short-term obligations.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA BALANCED ALLOCATION FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
The Fund is also subject to the risk that the Adviser's asset allocation
decisions will not anticipate market trends successfully. For example, weighting
common stocks too heavily during a stock market decline may result in a failure
to preserve capital. Conversely, investing too heavily in fixed income
securities during a period of stock market appreciation may result in lower
total return.
The smaller capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these small companies may have limited product lines, markets and
financial resources, and may depend upon a relatively small management group.
Therefore, small cap stocks may be more volatile than those of larger companies
may. These securities may be traded over-the-counter or listed on an exchange
and may or may not pay dividends.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segments, investment grade
fixed income and growth-oriented equity securities, may underperform other fixed
income or equity market segments or the fixed income or equity markets as a
whole.
Page 20 of 70
<PAGE>
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it has not completed a full calendar year of operations.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Balanced Allocation Fund -- Class I Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
$XXX $XXX
Page 21 of 70
<PAGE>
ARMADA TOTAL RETURN ADVANTAGE FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income as well as preservation
of capital
INVESTMENT FOCUS Investment grade fixed income
securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in investment grade fixed
income securities, while maintaining
an average dollar-weighted maturity of
between four and twelve years.
INVESTOR PROFILE Investors seeking total return with
less price volatility than would be
the case if the Fund were to invest in
equity securities, and who are willing
to accept the risks of investing in
fixed income securities
***
INVESTMENT STRATEGY OF THE ARMADA TOTAL RETURN ADVANTAGE FUND
***
The Armada Total Return Advantage Fund's investment objective is to provide
current income as well as preservation of capital by investing primarily in a
portfolio of high-and medium-grade fixed income securities. The investment
objective may be changed without a shareholder vote. The Fund normally
invests at least 80% of the value of its total assets in investment grade
fixed income securities of all types, including asset-backed securities and
mortgage-backed securities and obligations of corporate and governmental
issuers. Investment grade fixed income securities are those rated in one of
the four highest rating categories by a major rating agency, or determined by
the Adviser to be of equivalent quality. In buying and selling securities for
the Fund, the Adviser uses a number of strategies, including
duration/maturity management, sector allocation and individual security
selection. The Fund may invest up to 15% of its assets in fixed income
securities that are non-rated or rated below investment grade.
The Fund generally maintains an average dollar-weighted maturity of between four
and twelve years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA TOTAL RETURN ADVANTAGE FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
Junk bonds involve greater risks of default or downgrade and are more volatile
than investment grade securities. Junk bonds involve greater risk of default or
price declines than investment grade securities due to actual or perceived
changes in an issuer's creditworthiness. In addition, issuers of junk bonds may
be more susceptible than other issuers to economic downturns. Junk bonds are
subject to the risk that the issuer may not be able to pay interest or dividends
and ultimately to repay principal upon maturity. Discontinuation of these
payments could substantially adversely affect the market value of the security.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segment, investment grade
fixed income securities, may underperform other fixed income market segments or
the fixed income market as a whole.
Page 22 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS GOVERNMENT/CORPORATE
BOND INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
ARMADA TOTAL RETURN ADVANTAGE FUND X.XX% X.XX%*
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX X.XX% X.XX%**
</TABLE>
* Since July 7, 1994
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Total Return Advantage Fund -- Class I Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 23 of 70
<PAGE>
ARMADA BOND FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income as well as preservation
of capital
INVESTMENT FOCUS Investment-grade fixed income
securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in a diversified portfolio
of investment-grade fixed income
securities, which maintains a
dollar-weighted average maturity of
between four and twelve years
INVESTOR PROFILE Investors seeking current income, and
who are willing to accept the risks of
investing in fixed income securities
***
INVESTMENT STRATEGY OF THE ARMADA BOND FUND
***
The Armada Bond Fund's investment objective is to provide current income as
well as preservation of capital by investing primarily in a portfolio of high-
and medium-grade fixed income securities. The investment objective may be
changed without a shareholder vote. The Fund normally invests at least 80% of
the value of its total assets in investment grade fixed income securities of
all types, including obligations of corporate and governmental issuers and
mortgage-backed and asset-backed securities. Investment-grade fixed income
securities are those rated in one of the four highest rating categories by a
major rating agency, or determined by the Adviser to be of equivalent
quality. The Fund generally maintains a dollar-weighted average maturity of
between four and twelve years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA BOND FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segment, investment grade
fixed income securities, may underperform other fixed income market segments or
the fixed income market as a whole.
Page 24 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN AGGREGATE BOND INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C>
ARMADA BOND FUND X.XX% X.XX%*
LEHMAN AGGREGATE BOND INDEX X.XX% X.XX%**
</TABLE>
* Since August 10, 1994
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Administrator is waiving
a portion of the fees in order to keep total operating expenses at a specified
level. The Administrator may discontinue all or part of these waivers at any
time. With these fee waivers, the Fund's actual total operating expenses are as
follows:
Armada Bond Fund -- Class I Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 25 of 70
<PAGE>
ARMADA INTERMEDIATE BOND FUND
FUND SUMMARY
***
INVESTMENT GOAL High current income as well as
preservation of capital
INVESTMENT FOCUS Investment grade fixed income
securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in investment grade fixed
income securities, while maintaining a
dollar-weighted average maturity
between two and ten years or less
INVESTOR PROFILE Investors seeking current income, and
who are willing to accept the risks of
investing in fixed income securities
***
INVESTMENT STRATEGY OF THE ARMADA INTERMEDIATE BOND FUND
***
The Armada Intermediate Bond Fund's investment objective is to provide current
income as well as preservation of capital by investing in a portfolio of high-
and medium-grade fixed income securities. The investment objective may be
changed without a shareholder vote. The Fund normally invests at least 80% of
the value of its total assets in domestic and foreign investment grade fixed
income securities of all types, including obligations of corporate and
governmental issuers and mortgage-backed and asset-backed securities. Investment
grade fixed income securities are those rated in one of the four highest rating
categories by a major rating agency, or determined by the Adviser to be of
equivalent quality. The Fund generally maintains an average maturity of between
two and ten years.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA INTERMEDIATE BOND FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country. These
various risks will be even greater for investments in emerging market countries
since political turmoil and rapid changes in economic conditions are more likely
to occur in these countries.
The Fund is also subject to the risk that its market segment, investment grade
fixed income securities, may underperform other fixed income market segments or
the fixed income market as a whole.
Page 26 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1990 X.XX%
1991 X.XX%
1992 X.XX%
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE
BOND INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARMADA INTERMEDIATE BOND FUND X.XX% X.XX% X.XX% X.XX%*
LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE
BOND INDEX X.XX% X.XX%* X.XX% X.XX%**
</TABLE>
* Since December 20, 1989
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Intermediate Bond Fund -- Class I Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 27 of 70
<PAGE>
ARMADA GNMA FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income as well as preservation
of capital
INVESTMENT FOCUS Mortgage-backed (pass-through)
securities
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT STRATEGY Investing in mortgage-pass-through
securities, guaranteed by the
Government National Mortgage
Association (GNMA)
INVESTOR PROFILE Investors seeking current income, and
who are willing to accept the risks of
investing in mortgage-backed
securities
***
INVESTMENT STRATEGY OF THE ARMADA GNMA FUND
***
The Armada GNMA Fund's investment objective is to provide current income as
well as preservation of capital by investing primarily in mortgage
pass-through securities guaranteed by GMNA. The investment objective may be
changed without a shareholder vote. The Fund normally invests at least 80% of
the value of its total assets in mortgage pass-through securities guaranteed
by GNMA, which is an agency of the U.S. government established to supervise
and finance certain types of mortgages. In addition to mortgage-backed
securities, the Fund invests in other types of investment grade fixed income
securities.
In buying and selling securities for the Fund, the Adviser assesses current and
projected market conditions and seeks to enhance income by actively adjusting
the average maturity of the Fund to respond to changes.
The Fund's dollar-weighted average portfolio maturity will be between two and
ten years. Investment grade fixed income securities are those rated in one of
the four highest rating categories by a major rating agency, or determined by
the Adviser to be of equivalent quality.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA GNMA FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
Mortgage-backed securities are fixed income securities representing an interest
in a pool of underlying mortgage loans. They are sensitive to changes in
interest rates, but may respond to these changes differently from other fixed
income securities due to the possibility of prepayment of the underlying
mortgage loans. As a result, it may not be possible to determine in advance the
actual maturity date or average life of a mortgage-backed security. Rising
interest rates tend to discourage refinancings, with the result that the average
life and volatility of the security will increase, exacerbating its decrease in
market price. When interest rates fall, however, mortgage-backed securities may
not gain as much in market value because of the expectation of additional
mortgage prepayments that must be reinvested at lower interest rates. Prepayment
risk may make it difficult to calculate the average maturity of the Fund of
mortgage-backed securities and, therefore, to assess the volatility risk of the
Fund.
The Fund is also subject to the risk that its market segment, mortgage-backed
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
Page 28 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN GNMA INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------
<S> <C> <C>
ARMADA GNMA FUND X.XX% X.XX%*
LEHMAN GNMA INDEX X.XX% X.XX%**
</TABLE>
* Since August 10, 1994
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada GNMA Fund -- Class I Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 29 of 70
<PAGE>
ARMADA ENHANCED INCOME FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income as well as preservation
of capital
INVESTMENT FOCUS Investment grade debt securities
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT STRATEGY Investing in investment grade fixed
income securities, while maintaining a
dollar-weighted average maturity of
between one and five years
INVESTOR PROFILE Investors seeking total return and who
are willing to accept some risks of
price volatility
***
INVESTMENT STRATEGY OF THE ARMADA ENHANCED INCOME FUND
***
The Armada Enhanced Income Fund's investment objective is to provide current
income as well as preservation of capital by investing in a portfolio of high
and medium-grade fixed-income securities. The investment objective may be
changed without a shareholder vote. The Fund normally invests at least 80% of
the value of its total assets in investment grade debt securities of all
types. Investment grade fixed income securities are those rated in one of the
four highest rating categories by a major rating agency, or determined by the
Adviser to be of equivalent quality. In buying and selling securities for the
Fund, the Adviser considers a number of factors, including yield to maturity,
maturity, quality and the outlook for particular issuers and market sectors.
The Fund generally maintains an average dollar-weighted portfolio maturity of
between one and five years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA ENHANCED INCOME FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund invests in leveraged instruments, such as futures and options
contracts. The more the Fund invests in these leveraged instruments, the greater
the possibility for gains or losses on those investments.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segment, investment grade
fixed income securities, may underperform other fixed income market segments or
the fixed income market as a whole.
Page 30 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE MERRILL LYNCH 1-3 YEAR TREASURY INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------
<S> <C> <C>
ARMADA ENHANCED INCOME FUND X.XX% X.XX%*
MERRILL LYNCH 1-3 YEAR TREASURY INDEX X.XX% X.XX%**
</TABLE>
* Since July 7, 1994
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Enhanced Income Fund -- Class I Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 31 of 70
<PAGE>
ARMADA OHIO TAX EXEMPT BOND FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income exempt from Federal
income and, to the extent possible,
Ohio personal income taxes,
consistent with conservation of
capital
INVESTMENT FOCUS Ohio municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in municipal obligations
that pay interest that is exempt from
Federal income and Ohio personal
income taxes
INVESTOR PROFILE Investors seeking tax-exempt current
income, and who are willing to accept
moderate share price volatility
***
INVESTMENT STRATEGY OF THE ARMADA OHIO TAX EXEMPT BOND FUND
***
The Armada Ohio Tax Exempt Bond Fund's investment objective is to provide
current income exempt from Federal income tax and, to the extent possible,
from Ohio personal income tax, as is consistent with the conservation of
capital. The investment objective may be changed without a shareholder vote.
Under normal conditions, at least 80% of the value of the Fund's total assets
will be invested in municipal securities. The Fund invests at least 65% of
its total assets in debt securities issued by the State of Ohio, its
political subdivisions and their agencies and instrumentalities that generate
income exempt from Federal income and Ohio personal income taxes (Ohio
municipal securities). The Fund may invest up to 20% of its total assets in
private activity bonds which may be treated as a specific tax preference item
under the federal alternative minimum tax. In selecting securities for the
Fund to buy and sell, the Adviser considers each security's yield and total
return potential relative to other available municipal securities.
The Fund invests in investment grade securities, which are those rated in one of
the four highest rating categories by a major rating agency, or determined by
the Adviser to be of equivalent quality. The Fund ordinarily will maintain an
average weighted portfolio maturity of between two and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and capital gains tax liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA OHIO TAX EXEMPT BOND FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
The Fund is also subject to the risk that its market segment, tax-exempt
municipal securities, may underperform other fixed income market segments or the
fixed income market as a whole.
An investment in the Fund is subject to interest risk, which is the possibility
that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
The Fund's concentration of investments in securities of issuers located in a
single state subjects the Fund to economic and government policies of that
state.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or political and regulatory occurrences affecting one or
more of these issuers, and may experience increased volatility due to its
investments in those securities.
Page 32 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future. The table measures
performance in terms of total return. However, this Fund is managed for yield
and not total return.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1991 X.XX%
1992 X.XX%
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS MUTUAL FUND INTERMEDIATE
INDEX AND THE LEHMAN 7 YEAR MUNI BOND INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
ARMADA OHIO TAX EXEMPT BOND FUND X.XX% X.XX% X.XX%*
LEHMAN BROTHERS MUTUAL FUND INTERMEDIATE INDEX X.XX% X.XX% X.XX%**
LEHMAN 7 YEAR MUNI BOND INDEX X.XX% X.XX% X.XX%**
</TABLE>
* Since January 5, 1990
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Ohio Tax Exempt Bond Fund -- Class I Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 33 of 70
<PAGE>
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income exempt from both
regular Federal income tax and, to the
extent possible, Pennsylvania personal
income tax as is consistent with
conservation of capital
INVESTMENT FOCUS Pennsylvania municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in municipal obligations
that pay interest that is exempt from
Federal income and Pennsylvania
personal income taxes
INVESTOR PROFILE Investors seeking tax-exempt current
income, and who are willing to accept
moderate share price volatility
***
INVESTMENT STRATEGY OF THE ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
***
The Armada Pennsylvania Municipal Bond Fund's investment objective is to
provide current income exempt from regular Federal income tax and, to the
extent possible, from Pennsylvania personal income tax, as is consistent with
conservation of capital. The investment objective may be changed without a
shareholder vote. The Fund invests primarily in debt securities issued by the
Commonwealth of Pennsylvania, its political subdivisions and their agencies
and instrumentalities that generate income exempt from Federal income and
Pennsylvania personal income taxes (Pennsylvania municipal securities). The
Fund may invest up to 100% of its total assets in private activity bonds
which may be treated as a specific tax preference item under the Federal
alternative minimum tax. In selecting securities for the Fund to buy and
sell, the Adviser considers each security's yield and total return potential
relative to other available municipal securities.
The Fund invests in investment grade securities, which are those rated in one of
the four highest rating categories by a major rating agency, or determined by
the Adviser to be of equivalent quality. The Fund ordinarily will maintain an
average weighted portfolio maturity of between two and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and capital gains tax liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
The Fund is also subject to the risk that its market segment, tax free municipal
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
The Fund's concentration of investments in securities of issuers located in a
single state subjects the Fund to economic conditions and government policies
within that state.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or political and regulatory occurrences affecting one or
more of these issuers, and may experience increased volatility due to its
investments in those securities.
Page 34 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future. The table measures
performance in terms of total return. However, this Fund is managed for yield
and not total return.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN BROTHERS MUTUAL FUND INTERMEDIATE
INDEX AND THE LEHMAN 7 YEAR MUNI BOND INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND X.XX% X.XX%*
LEHMAN BROTHERS MUTUAL FUND INTERMEDIATE INDEX X.XX% X.XX%**
LEHMAN 7 YEAR MUNI BOND INDEX X.XX% X.XX%**
</TABLE>
* Since August 10, 1994
** Since [calc. date for index]
WHAT IS AN INDEX?
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. Unlike a mutual fund, an index does not have an investment adviser
and does not pay any commissions or expenses. If an index had expenses, its
performance would be lower.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Pennsylvania Municipal Bond Fund -- Class I Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 35 of 70
<PAGE>
ARMADA NATIONAL TAX EXEMPT BOND FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income exempt from Federal
income tax as is consistent with
conservation of capital
INVESTMENT FOCUS Municipal securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in municipal obligations
that pay interest that is exempt from
Federal income tax
INVESTOR PROFILE Investors seeking tax-exempt current
income, and who are willing to accept
moderate share price volatility
***
INVESTMENT STRATEGY OF THE ARMADA NATIONAL TAX EXEMPT BOND FUND
***
The Armada National Tax Exempt Bond Fund's investment objective is to provide
current income exempt from Federal income tax as is consistent with conservation
of capital. The investment objective may be changed without a shareholder vote.
The Fund invests at least 80% of its total assets in debt securities that
generate income exempt from Federal income tax. The Fund may invest up to 20% of
its total assets in private activity bonds, the income of which may be treated
as a specific tax preference item under the Federal alternative minimum tax. The
Fund invests in municipal securities 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. In
selecting securities for the Fund to buy and sell, the Adviser considers each
security's yield and total return potential relative to other available
municipal securities.
The Fund invests only in investment grade securities. Investment grade municipal
securities are those rated in one of the four highest rating categories as
determined by a major rating agency. The Fund ordinarily will maintain a
dollar-weighted average portfolio maturity of between two and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and capital gains tax liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA NATIONAL TAX EXEMPT BOND FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
The Fund is also subject to the risk that its market segment, tax exempt
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
Page 36 of 70
<PAGE>
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it has not completed a full calendar year of operations.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada National Tax Exempt Bond Fund -- Class I Shares X.XX%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
$XXX $XXX
Page 37 of 70
<PAGE>
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income exempt from regular
Federal income tax and Ohio personal
income tax, consistent with
stability of principal
INVESTMENT FOCUS Ohio municipal money market
instruments
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of high
quality short-term debt securities
designed to allow the Fund to
maintain a stable net asset value of
$1.00 per share
INVESTOR PROFILE Conservative taxable investors in
higher tax brackets seeking current
income exempt from Federal and Ohio
income taxes
***
INVESTMENT STRATEGY OF THE ARMADA OHIO MUNICIPAL MONEY MARKET FUND
***
The Armada Ohio Municipal Money Market Fund's investment objective is to
provide current income exempt from regular Federal income tax and Ohio
personal income taxes, consistent with stability of principal. The investment
objective may be changed without a shareholder vote. The Fund invests
exclusively in high quality money market instruments issued by or on behalf
of the State of Ohio, political subdivisions thereof or agencies or
instrumentalities of Ohio or its political subdivisions, the income from
which is exempt from regular Federal income tax and Ohio personal income tax
(Ohio money market instruments). High quality money market instruments are
securities that present minimal credit risks as determined by the Adviser and
generally include securities that are rated at the time of purchase by a
major rating agency in the two highest rating categories for such securities,
and certain securities that are not so rated but are of comparable quality
as determined by the Adviser. The Fund may invest 100% of its assets in
private activity bonds, the interest from which is a preference item for the
Federal alternative minimum tax. Under normal market conditions, at least 80%
of the value of the Fund's total assets will be invested in Ohio money market
instruments. 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.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment and a separate
credit analysis, the Adviser uses gradual shifts in portfolio maturity to
respond to expected changes and selects securities that it believes offer the
most attractive risk/return trade off.
As a money market fund, the Fund invests only in instruments with remaining
maturities of 397 days or less that the Adviser believes present minimal credit
risk. The Fund maintains an average weighted maturity of 90 days or less.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA OHIO MUNICIPAL MONEY MARKET FUND
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, Ohio municipal
money market securities, may underperform other fixed income market segments or
the fixed income market as a whole.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
The Fund's concentration of investments in securities of issuers located in a
single state subjects the Fund to economic and government policies of that
state.
Page 38 of 70
<PAGE>
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it has not completed a full calendar year of operations.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Ohio Municipal Money Market Fund-- Class I Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
$XXX $XXX
Page 39 of 70
<PAGE>
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
FUND SUMMARY
***
INVESTMENT GOAL High current income exempt from
regular Federal income tax and
Pennsylvania personal income tax,
consistent with stability of principal
INVESTMENT FOCUS Pennsylvania municipal money market
instruments
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of high
quality short-term debt securities
designed to allow the Fund to maintain
a stable net asset value per share
INVESTOR PROFILE Conservative taxable investors in
higher tax brackets seeking current
income exempt from Federal and
Pennsylvania income taxes
***
INVESTMENT STRATEGY OF THE ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
***
The Armada Pennsylvania Tax Exempt Money Market Fund's investment objective
is to provide current income exempt from regular federal income tax and
Pennsylvania personal income tax, consistent with stability of principal. The
investment objective may be changed without a shareholder vote. The Fund
invests exclusively in high quality money market instruments 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 is
exempt from regular Federal income tax and Pennsylvania income taxes
(Pennsylvania municipal money market instruments). High quality money market
instruments are securities that present minimal credit risks as determined by
the Adviser and generally include securities that are rated at the time of
purchase by a major rating agency in the two highest rating categories for
such securities, and certain securities that are not so rated but are of
comparable quality as determined by the Adviser. 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 tax, but it is not considered a reference item
for purposes of the Federal alternative minimum tax.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment and a separate
credit analysis, the Adviser uses gradual shifts in portfolio maturity to
respond to expected changes and selects securities that it believes offer the
most attractive risk/return trade off.
As a money market fund, the Fund invests only in instruments with remaining
maturities of 397 days or less that the Adviser believes present minimal credit
risk. The Fund maintains an average weighted maturity of 90 days or less.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET
FUND
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, tax exempt money
market securities, may underperform other fixed income market segments or the
fixed income market as a whole.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
The Fund's concentration of investments in securities of issuers located in a
single state subjects the Fund to economic and government policies of that
state.
Page 40 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future. The table measures
performance in terms of total return. However, this Fund is managed for yield
and not total return.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C>
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND X.XX% X.XX%*
</TABLE>
* Since August 8, 1994
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- -------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- -------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Pennsylvania Tax Exempt Money Market Fund -- Class I Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 41 of 70
<PAGE>
ARMADA TAX EXEMPT MONEY MARKET FUND
FUND SUMMARY
***
INVESTMENT GOAL High current interest income exempt
from Federal income tax consistent
with stability of principal while
maintaining liquidity
INVESTMENT FOCUS Municipal money market instruments
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of high
quality short-term debt securities
designed to allow the Fund to maintain
a stable net asset value of $1.00 per
share
INVESTOR PROFILE Conservative taxable investors in
higher tax brackets seeking current
income exempt from Federal income
taxes
***
INVESTMENT STRATEGY OF THE ARMADA TAX EXEMPT MONEY MARKET FUND
***
The Armada Tax Exempt Money Market Fund's investment objective is to provide
as high a level of current interest income exempt from Federal tax as
is consistent with liquidity and stability of principal. The investment
objective may be changed without a shareholder vote. The Fund invests
primarily in high quality money market instruments 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 that pay interest exempt from Federal taxes ("municipal money
market instruments"). High quality money market instruments are securities
that present minimal credit risks as determined by the Adviser and generally
include securities that are rated at the time of purchase by a major rating
agency in the highest two rating categories for such securities, and certain
securities that are not so rated but are of comparable quality as determined
by the Adviser. Under normal market conditions, at least 80% of the value of
the 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.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment and a separate
credit analysis, the Adviser uses gradual shifts in portfolio maturity to
respond to expected changes and selects securities that it believes offer the
most attractive risk/return trade off.
As a money market fund, the Fund invests only in money market instruments
with remaining maturities of 397 days or less that the Adviser believes
present minimum credit risk. The Fund maintains an average weighted maturity
of 90 days or less.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA TAX EXEMPT MONEY MARKET FUND
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
The Fund is also subject to the risk that its market segment, tax exempt money
market instruments, may underperform other fixed income market segments or the
fixed income market as a whole.
Page 42 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future. The table measures
performance in terms of total return. However, this fund is managed for yield
and not total return.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1989 X.XX%
1990 X.XX%
1991 X.XX%
1992 X.XX%
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARMADA TAX EXEMPT MONEY MARKET FUND X.XX% X.XX% X.XX% X.XX%*
</TABLE>
* Since July 20, 1988
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- -------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- -------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Tax Exempt Money Market Fund -- Class I Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
$XXX $XXX
Page 43 of 70
<PAGE>
ARMADA MONEY MARKET FUND
FUND SUMMARY
***
INVESTMENT GOAL High current income consistent with
stability of principal while
maintaining liquidity
INVESTMENT FOCUS Money market instruments
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of high
quality short-term debt securities
designed to allow the Fund to maintain
a stable net asset value of $1.00 per
share
INVESTOR PROFILE Conservative investors seeking current
income through a liquid investment
***
INVESTMENT STRATEGY OF THE ARMADA MONEY MARKET FUND
***
The Armada Money Market Fund's investment objective is to provide as high a
level of current income as is consistent with liquidity and stability of
principal. The investment objective may be changed without a shareholder
vote. The Fund invests in a variety of high quality money market securities,
including certificates of deposit and other obligations issued by domestic
and foreign banks, as well as commercial paper. The Adviser also invests in
securities issued or guaranteed by the U.S. government or its agencies
(government obligations) and repurchase agreements collateralized by
government obligations and issued by financial institutions such as banks and
broker-dealers. High quality money market instruments are securities that
present minimal credit risks as determined by the Adviser and generally
include securities that are rated at the time of purchase by a major rating
agency in the highest two rating categories for such securities, and certain
securities that are not so rated but are of comparable quality as determined
by the Adviser.
Buying and selling for the Fund, the Adviser seeks to add value through yield
analysis and positioning on the yield curve. Investments are made in money
market instruments with the most attractive risk/return trade-offs.
As a money market fund, the Fund invests only in money market instruments
with remaining maturities of 397 days or less that the Adviser believes
present minimal credit risk. The Fund maintains an average weighted maturity
of 90 days or less.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA MONEY MARKET FUND
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, money market
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
Page 44 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1989 X.XX%
1990 X.XX%
1991 X.XX%
1992 X.XX%
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARMADA MONEY MARKET FUND X.XX% X.XX% X.XX% X.XX%*
</TABLE>
* Since September 3, 1986
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Money Market Fund -- Class I Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 45 of 70
<PAGE>
ARMADA GOVERNMENT MONEY MARKET FUND
FUND SUMMARY
***
INVESTMENT GOAL High current income consistent with
stability of principal while
maintaining liquidity
INVESTMENT FOCUS Money market instruments issued or
guaranteed by the U.S. government, its
agencies and instrumentalities and
repurchase agreements
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of high
quality short-term debt securities
issued by the U.S. government, its
agencies and instrumentalities and
repurchase agreements related to such
securities designed to allow the Fund
to maintain a stable net asset value
of $1.00 per share
INVESTOR PROFILE Conservative investors seeking current
income through a liquid investment
***
INVESTMENT STRATEGY OF THE ARMADA GOVERNMENT MONEY MARKET FUND
***
The Armada Government Money Market Fund's investment objective is to provide
as high a level of current income as is consistent with liquidity and
stability of principal. The investment objective may be changed without a
shareholder vote. The Fund invests exclusively in obligations issued or
guaranteed as to the payment of principal and interest by the U.S.
government, its agencies and instrumentalities and repurchase agreements.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment, the Adviser
uses gradual shifts in portfolio maturity to respond to expected changes and
selects securities that it believes offer the most attractive risk/return trade
off.
As a money market fund, the Fund invests only in money market instruments
with remaining maturities of 397 days or less and maintains an average
weighted maturity of 90 days or less.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA GOVERNMENT MONEY MARKET FUND
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
The Fund is also subject to the risk that its market segment, money market
instruments issued or guaranteed by the U.S. government, may underperform other
fixed income market segments or the fixed income market as a whole.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1989 X.XX%
1990 X.XX%
1991 X.XX%
1992 X.XX%
1993 X.XX%
1994 X.XX%
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARMADA GOVERNMENT MONEY MARKET FUND X.XX% X.XX% X.XX% X.XX%*
</TABLE>
* Since March 3, 1987
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- -------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- -------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Government Money Market Fund -- Class I Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 46 of 70
<PAGE>
ARMADA TREASURY MONEY MARKET FUND
***
FUND SUMMARY
INVESTMENT GOAL High current income consistent with
stability of principal while
maintaining liquidity
INVESTMENT FOCUS U.S. Treasury securities
HARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of high
quality short-term obligations of the
U.S. Treasury designed to allow the
Fund to maintain a stable net asset
value per share
INVESTOR PROFILE Conservative investors seeking current
income through a liquid investment
***
INVESTMENT STRATEGY OF THE ARMADA TREASURY MONEY MARKET FUND
***
The Armada Treasury Money Market Fund's investment objective is to provide as
high a level of current income as is consistent with liquidity and stability
of principal. The investment objective may be changed without a shareholder
vote. The Fund invests exclusively in direct obligations of the U.S.
Treasury, such as Treasury bills and notes, and in other money market funds
that invest exclusively in such obligations.
In managing the Fund, the Adviser assesses current and projected market
conditions, particularly interest rates. Based on this assessment, the Adviser
uses gradual shifts in portfolio maturity to respond to expected changes and
selects securities that it believes offer the most attractive risk/return trade
off.
As a money market fund, the Fund invests only in money market instruments
with remaining maturities of 397 days or less and maintains an average
weighted maturity of 90 days or less.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA TREASURY MONEY MARKET FUND
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to the risk that its market segment, U.S. Treasury
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
Page 47 of 70
<PAGE>
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of an
investment in the Fund. Of course, the Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
1995 X.XX%
1996 X.XX%
1997 X.XX%
1998 X.XX%
BEST QUARTER WORST QUARTER
X.XX% X.XX%
(X/X/XX) (X/X/XX)
The Fund's performance from January 1, 1999 to June 30, 1999 was X.XX%.
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 1998.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C>
ARMADA TREASURY MONEY MARKET FUND X.XX% X.XX%*
</TABLE>
* Since June 16, 1994
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%*
</TABLE>
- -------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Administrator is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Administrator may discontinue all or part of these waivers
at any time. With these fee waivers, the Fund's actual total operating expenses
are as follows:
Armada Treasury Money Market Fund -- Class I Shares ____%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$XXX $XXX $XXX $XXX
Page 48 of 70
<PAGE>
ARMADA MID CAP GROWTH FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Mid-cap equity securities
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in growth-oriented equity
securities of medium-sized issuers
INVESTOR PROFILE Investors seeking capital growth, and
who are willing to accept the risks of
investing in equity securities
***
INVESTMENT STRATEGY OF THE ARMADA MID CAP GROWTH FUND
***
The Armada Mid Cap Growth Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded mid
cap equity securities. The investment objective may be changed without a
shareholder vote. The Fund will normally invest at least 80% of its total
assets in securities of companies with mid stock market capitalizations. The
Fund may invest up to 20% of its total assets at the time of purchase in
foreign securities. In selecting investments for the Fund to buy and sell,
the Adviser invests in companies that have typically exhibited consistent,
above-average growth in revenues and earnings, strong management, sound and
improving financial fundamentals and presently exhibit the potential for
growth.
The Fund considers a "mid-capitalization (mid cap)" company to be one that
has a comparable market capitalization within the range as the companies in
the Russell Mid Cap Growth Index.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA MID CAP GROWTH FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
The Fund is also subject to the risk that its market segment, mid cap equity
securities, may underperform other equity market segments or the equity market
as a whole.
Page 49 of 70
<PAGE>
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it is not yet operating.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- -------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
$XXX $XXX
Page 50 of 70
<PAGE>
ARMADA LARGE CAP ULTRA FUND
FUND SUMMARY
***
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Large cap equity securities
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in equity securities of
large companies that the Adviser
believes have the potential for
long-term above-average growth
INVESTOR PROFILE Investors seeking growth of capital,
and who are willing to accept the
risks of investing in equity
securities
***
INVESTMENT STRATEGY OF THE ARMADA LARGE CAP ULTRA FUND
***
The Armada Large Cap Ultra Fund's investment objective is to provide capital
appreciation by investing in a diversified portfolio of publicly traded
larger cap equity securities. The investment objective may be changed without
a shareholder vote. The Fund will normally invest at least 80% of its total
assets in the securities of companies with large market capitalizations.
The Adviser takes a long-term approach to managing the Fund and typically
invests in companies that have exhibited consistent, above-average growth in
revenues and earnings, strong management, and sound and improving financial
fundamentals.
The Fund considers a "large capitalization (large cap)" portfolio company to be
one that has a comparable market capitalization as the companies in the S&P 500
Barra Growth Index.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA LARGE CAP ULTRA FUND
Since it purchases equity securities, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's equity
securities may fluctuate from day-to-day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may decline in
response. These factors contribute to price volatility, which is the principal
risk of investing in the Fund.
The Fund is also subject to the risk that its market segment, large cap equity
securities, may underperform other equity market segments or the equity market
as a whole.
Page 51 of 70
<PAGE>
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it is not yet operating.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
$XXX $XXX
Page 52 of 70
<PAGE>
ARMADA U.S. GOVERNMENT INCOME FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income as well as preservation
of capital
INVESTMENT FOCUS U.S. government securities
SHARE PRICE VOLATILITY Low
PRINCIPAL INVESTMENT STRATEGY Investing in mortgage-related
securities issued or guaranteed by the
U.S. government
INVESTOR PROFILE Investors seeking current income, and
who are willing to accept the risks of
investing in fixed income securities
***
INVESTMENT STRATEGY OF THE ARMADA U.S. GOVERNMENT INCOME FUND
***
The Armada U.S. Government Income Fund's investment objective is to provide
current income as well as preservation of capital by investing primarily in
U.S. government securities. The investment objective may be changed without a
shareholder vote. The Fund invests normally at least 80% of its total assets
in obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. The Fund may invest up to 20% of the value of its total
assets in debt securities and preferred stock of non-governmental issuers and
the same proportion of its total assets in non-governmental asset backed
securities. The Fund generally maintains a dollar-weighted average maturity
of between two and ten years.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA U.S. GOVERNMENT INCOME FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
The Fund is also subject to the risk that its market segment, U.S. Government
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The mortgages underlying mortgage-backed securities may be paid off early, which
makes it difficult to determine their actual maturity and therefore calculate
how they will respond to changes in interest rates. The Fund may have to
reinvest prepaid amounts at lower interest rates. This risk of prepayment is an
additional risk of mortgage-backed securities.
Although the Fund's U.S. government securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by some U.S. government agencies and
instrumentalities are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
Page 53 of 70
<PAGE>
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it is not yet operating.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- -------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
$XXX $XXX
Page 54 of 70
<PAGE>
ARMADA MICHIGAN MUNICIPAL BOND FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income exempt from
Federal income tax and, to the extent
possible, from Michigan personal
income tax, as is consistent with
conservation of capital
INVESTMENT FOCUS Michigan Tax Exempt securities
SHARE PRICE VOLATILITY Medium
PRINCIPAL INVESTMENT STRATEGY Investing in municipal obligations
that pay interest that is exempt from
Federal and Michigan state income
taxes
INVESTOR PROFILE Investors seeking tax-exempt current
income, and who are willing to accept
moderate share price volatility
***
INVESTMENT STRATEGY OF THE ARMADA MICHIGAN MUNICIPAL BOND FUND
***
The Armada Michigan Municipal Bond Fund's investment objective is to provide
current income exempt from Federal income tax and, to the extent possible,
from Michigan personal income tax, as is consistent with conservation of
capital. Such income may be subject to the federal alternative minimum tax
when received by certain shareholders. The investment objective may be
changed without a shareholder vote. The Fund invests primarily in debt
securities issued by or on behalf of the State of Michigan, its political
subdivisions and its agencies and instrumentalities that generate income
exempt from Federal and Michigan state income, but may be treated as a
preference item for individuals for purposes of the federal alternative
minimum tax (Michigan municipal securities). The Fund also invests in
municipal securities issued by or on behalf of territories and possessions of
the United States, the District of Columbia and their political subdivisions,
agencies, instrumentalities and authorities. In selecting securities for the
Fund to buy and sell, the Adviser considers each security's yield and total
return potential relative to other available municipal securities. Under
normal market conditions, at least 80% of the value of the Fund's total
assets will be invested in Michigan municipal securities. The Fund may invest
up to 100% of its total assets in private activity bonds which may be treated
as a specific tax preference item under the Federal alternative minimum tax.
The Fund ordinarily will maintain a dollar-weighted average portfolio maturity
of between two and ten years. The Fund invests in investment grade securities,
which are those rated in one of the four highest rating categories by a major
rating agency, or determined by the Adviser to be of equivalent quality.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may result in higher transaction costs and additional capital gains tax
liabilities.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA MICHIGAN TAX EXEMPT BOND FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including governments.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa, and the volatility of lower rated securities is even
greater than that of higher rated securities. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
The Fund is also subject to the risk that its market segment, tax free municipal
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
There may be economic or political changes that impact the ability of municipal
issuers to repay principal and to make interest payments on municipal
securities. Changes in the financial condition or credit rating of municipal
issuers also may adversely affect the value of the Fund's securities.
Since the Fund may purchase securities supported by credit enhancements from
banks and other financial institutions, changes in the credit quality of these
institutions could cause losses to the Fund and affect its share price.
The Fund's concentration of investments in securities of issuers located in a
single state subjects the Fund to economic and government policies of that
state.
The Fund is non-diversified, which means that it may invest in the securities of
relatively few issuers. As a result, the Fund may be more susceptible to a
single adverse economic or political and regulatory occurrences affecting one or
more of these issuers, and may experience increased volatility due to its
investments in those securities.
Page 55 of 70
<PAGE>
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it is not yet operating.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
$XXX $XXX
Page 56 of 70
<PAGE>
ARMADA TREASURY PLUS MONEY MARKET FUND
FUND SUMMARY
***
INVESTMENT GOAL Current income consistent with
liquidity and stability of principal
INVESTMENT FOCUS U.S. Treasury securities and
repurchase agreements related to such
securities
SHARE PRICE VOLATILITY Very low
PRINCIPAL INVESTMENT STRATEGY Investing in a portfolio of high
quality short-term obligations of the
U.S. Treasury designed to allow the
Fund to maintain a stable net asset
value of $1.00 per share
INVESTOR PROFILE Investors seeking current income
through a liquid and stable investment
***
INVESTMENT STRATEGY OF THE ARMADA TREASURY PLUS MONEY MARKET FUND
***
The Armada Treasury Plus Money Market Fund's investment objective is to
provide current income with liquidity and stability of principal. The
investment objective may be changed without a shareholder vote. The Fund
invests exclusively in obligations issued or guaranteed by the U.S. Treasury,
and repurchase agreements related to such securities.
In managing the Fund, the Adviser assesses current and projected market
conditions. Based on this assessment, the Adviser uses gradual shifts in
portfolio maturity to respond to expected changes and selects securities that it
believes offer the most attractive trade off between risk and return.
As a money market fund, the Fund invests only in money market instruments with
remaining maturities of 397 days or less and maintains an average weighted
maturity of 90 days or less.
***
PRINCIPAL RISKS OF INVESTING IN THE ARMADA TREASURY PLUS MONEY MARKET FUND
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes. Generally, the Fund's fixed
income securities will decrease in value if interest rates rise and vice versa.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
Although the Fund's U.S. Treasury securities are considered to be among the
safest investments, they are not guaranteed against price movements due to
changing interest rates. Obligations issued by the U.S. Treasury are backed by
the U.S. Treasury.
The Fund is also subject to the risk that its market segment, U.S. Treasury
securities, may underperform other fixed income market segments or the fixed
income market as a whole.
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it has not completed a full calendar year of operations.
FUND FEES AND EXPENSES
EVERY MUTUAL FUND HAS OPERATING EXPENSES TO PAY FOR SERVICES SUCH AS
PROFESSIONAL ADVISORY, SHAREHOLDER, DISTRIBUTION, ADMINISTRATION AND CUSTODY
SERVICES AND OTHER COSTS OF DOING BUSINESS. THIS TABLE DESCRIBES THE HIGHEST
FEES AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- --------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees .XX%
Distribution and Service (12b-1) Fees .XX%
Other Expenses .XX%
----
Total Annual Fund Operating Expenses X.XX%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated.
The Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 YEAR 3 YEARS
$XXX $XXX
Page 57 of 70
<PAGE>
<TABLE>
<S> <C>
MORE INFORMATION ABOUT RISK
EQUITY RISK -- Equity securities include public and Armada International Equity Fund
privately issued equity securities, common and Armada Small Cap Value Fund
preferred stocks, warrants, rights to subscribe to Armada Small Cap Growth Fund
common stock and convertible securities, as well as Armada Equity Growth Fund
instruments that attempt to track the price Armada Tax Managed Equity Fund
movement of equity indices. Investments in equity Armada Core Equity Fund
securities and equity derivatives in general are Armada Equity Index Fund
subject to market risks that may cause their prices Armada Equity Income Fund
to fluctuate over time. The value of securities Armada Balanced Allocation Fund
convertible into equity securities, such as Armada Total Return Advantage Fund
warrants or convertible debt, is also affected by Armada Enhanced Income Fund
prevailing interest rates, the credit quality of Armada Mid Cap Growth Fund
the issuer and any call provision. Fluctuations in Armada Large Cap Ultra Fund
the value of equity securities in which a mutual
fund invests will cause a fund's net asset value to
fluctuate. An investment in a portfolio of equity
securities may be more suitable for long-term
investors who can bear the risk of these share
price fluctuations.
Convertible Securities -- Convertible securities Armada Equity Growth Fund
have characteristics of both fixed income and Armada Equity Income Fund
equity securities. The value of the convertible Armada Balanced Allocation Fund
security tends to move with the market value of Armada Mid Cap Growth Fund
the underlying stock, but may also be affected by Armada Large Cap Ultra Fund
interest rates, credit quality of the issuer and
any call provisions.
FIXED INCOME RISK-- The market value of fixed Armada Balanced Allocation Fund
income investments change in response to interest Armada Total Return Advantage Fund
rate changes and other factors. During periods of Armada Bond Fund
falling interest rates, the values of outstanding Armada Intermediate Bond Fund
fixed income securities generally rise. Moreover, Armada GNMA Fund
while securities with longer maturities tend to Armada Enhanced Income Fund
produce higher yields, the prices of longer Armada Ohio Tax Exempt Bond Fund
maturity securities are also subject to greater Armada Pennsylvania Municipal Bond Fund
market fluctuations as a result of changes in Armada National Tax Exempt Bond Fund
interest rates. In addition to these fundamental Armada Ohio Municipal Money Market Fund
risks, different types of fixed income securities Armada Pennsylvania Tax Exempt
may be subject to the following additional risks: Money Market Fund
Armada Tax Exempt Money Market Fund
Armada Money Market Fund
Armada Government Money Market Fund
Armada Treasury Money Market Fund
Armada U.S. Government Income Fund
Armada Michigan Municipal Bond Fund
Armada Treasury Plus Money Market Fund
Call Risk -- During periods of falling interest Armada Balanced Allocation Fund
rates, certain debt obligations with high Armada Total Return Advantage Fund
interest rates may be prepaid (or "called") by Armada Bond Fund
the issuer prior to maturity. This may cause a Armada Intermediate Bond Fund
Fund's average weighted maturity to fluctuate, Armada GNMA Fund
and may require a Fund to invest the resulting Armada Enhanced Income Fund
proceeds at lower interest rates. Armada Ohio Tax Exempt Bond Fund
Armada Pennsylvania Municipal Bond Fund
Armada National Tax Exempt Bond Fund
Armada Mid Cap Growth Fund
Armada U.S. Government Income Fund
Armada Michigan Municipal Bond Fund
Armada Treasury Plus Money Market Fund
CREDIT RISK -- The possibility that an issuer will Armada Balanced Allocation Fund
be unable to make timely payments of either Armada Total Return Advantage Fund
principal or interest. Armada Bond Fund
Armada Intermediate Bond Fund
Armada GNMA Fund
Armada Enhanced Income Fund
Armada Ohio Tax Exempt Bond Fund
Armada Pennsylvania Municipal Bond Fund
Armada National Tax Exempt Bond Fund
Armada Ohio Municipal Money Market Fund
Armada Pennsylvania Tax Exempt
Money Market Fund
Armada Tax Exempt Money Market Fund
Armada Money Market Fund
Armada Mid Cap Growth Fund
Armada Michigan Municipal Bond Fund
Page 58 of 70
<PAGE>
EVENT RISK -- Securities may suffer declines in Armada Tax Managed Equity Fund
credit quality and market value due to issuer Armada Balanced Allocation Fund
restructurings or other factors. This risk Armada Total Return Advantage Fund
should be reduced because of the diversification Armada Bond Fund
provided by the Fund's multiple holdings. Armada Intermediate Bond Fund
Armada GNMA Fund
Armada Enhanced Income Fund
Armada Ohio Tax Exempt Bond Fund
Armada Pennsylvania Municipal Bond Fund
Armada National Tax Exempt Bond Fund
Armada Ohio Municipal Money Market Fund
Armada Pennsylvania Tax Exempt
Money Market Fund
Armada Tax Exempt Money Market Fund
Armada Money Market Fund
Armada Mid Cap Growth Fund
Armada Michigan Municipal Bond Fund
Armada Treasury Plus Money Market Fund
HIGH-YIELD, LOWER RATED SECURITIES (or "junk Armada Total Return Advantage Fund
bonds") are subject to additional risks associated
with investing in high-yield securities, including:
- - High-yield, lower rated securities involve
greater risk of default or price declines than
investments in investment grade securities (e.g.,
securities rated BBB or higher by S&P or Baa or
higher by Moody's) due to changes in the issuer's
creditworthiness.
- - The market for high-yield, lower rated securities
may be thinner and less active, causing market price
volatility and limited liquidity in the secondary
market. This may limit the ability of a Fund to sell
these securities at their fair market values either
to meet redemption requests, or in response to
changes in the economy or the financial markets.
- - Market prices for high-yield, lower rated
securities may also be affected by investors'
perception of the issuer's credit quality and the
outlook for economic growth. Thus, prices for
high-yield, lower rated securities may move
independently of interest rates and the overall bond
market.
- - The market for high-yield, lower rated securities
may be adversely affected by legislative and
regulatory developments.
MUNICIPAL ISSUER RISK-- There may be economic or Armada Ohio Tax Exempt Bond Fund
political changes that impact the ability of Armada Pennsylvania Municipal Bond Fund
municipal issuers to repay principal and to make Armada National Tax Exempt Bond Fund
interest payments on municipal securities. Armada Ohio Municipal Money Market Fund
Changes to the financial condition or credit Armada Pennsylvania Tax Exempt Money Market Fund
rating of municipal issuers may also adversely Armada Tax Exempt Money Market Fund
affect the value of the Fund's municipal Armada Money Market Fund
securities. Constitutional or legislative limits Armada Michigan Municipal Bond Fund
on borrowing by municipal issuers may result in
reduced supplies of municipal securities.
Moreover, certain municipal securities are backed
only by a municipal issuer's ability to levy and
collect taxes.
In addition, the Fund's concentration of Armada Ohio Tax Exempt Bond Fund
investments in issuers located in a single state Armada Pennsylvania Municipal Bond Fund
makes the Fund more susceptible to adverse Armada Ohio Municipal Money Market Fund
political or economic developments affecting that Armada Pennsylvania Tax Exempt Money Market Fund
state. The Fund also may be riskier than mutual Armada Money Market Fund
funds that buy securities of issuers in numerous Armada Michigan Municipal Bond Fund
states.
MORTGAGE-BACKED SECURITIES-- Mortgage-backed Armada Total Return Advantage Fund
securities are fixed income securities Armada Bond Fund
representing an interest in a pool of underlying Armada Intermediate Bond Fund
mortgage loans. They are sensitive to changes in Armada GNMA Fund
interest rates, but may respond to these changes Armada Enhanced Income Fund
differently from other fixed income securities Armada U.S. Government Income Fund
due to the possibility of prepayment of the
underlying mortgage loans. As a result, it may
not be possible to determine in advance the
actual maturity date or average life of a
mortgage-backed security. Rising interest rates
tend to discourage refinancings, with the result
that the average life and volatility of the
security will increase exacerbating its decrease
in market price. When interest rates fall,
however, mortgage-backed securities may not gain
as much in market value because of the
expectation of additional mortgage prepayments
that must be reinvested at lower interest rates.
Prepayment risk may make it difficult to
calculate the average maturity of a portfolio of
mortgage-backed securities and, therefore, to
assess the volatility risk of that portfolio.
Page 59 of 70
<PAGE>
FOREIGN SECURITY RISKS-- Investments in securities Armada International Equity Fund
of foreign companies or governments can be more Armada Small Cap Value Fund
volatile than investments in U.S. companies or Armada Small Cap Growth Fund
governments. Diplomatic, political, or economic Armada Equity Growth Fund
developments, including nationalization or Armada Tax Managed Equity Fund
appropriation, could affect investments in foreign Armada Core Equity Fund
countries. Foreign securities markets generally Armada Equity Income Fund
have less trading volume and less liquidity than Armada Balanced Allocation Fund
U.S. markets. In addition, the value of securities Armada Total Return Advantage Fund
denominated in foreign currencies, and of dividends Armada Intermediate Bond Fund
from such securities, can change significantly when Armada Enhanced Income Fund
foreign currencies strengthen or weaken relative to Armada Mid Cap Growth Fund
the U.S. dollar. Foreign companies or governments Armada U.S. Government Income Fund
generally are not subject to uniform accounting,
auditing, and financial reporting standards
comparable to those applicable to domestic U.S.
companies or governments. Transaction costs are
generally higher than those in the U.S. and
expenses for custodial arrangements of foreign
securities may be somewhat greater than typical
expenses for custodial arrangements of similar U.S.
securities. Some foreign governments levy
withholding taxes against dividend and interest
income. Although in some countries a portion of
these taxes are recoverable, the non-recovered
portion will reduce the income received from the
securities comprising the portfolio.
In addition to these risks, certain
foreign securities may be subject to the
following additional risks factors:
CURRENCY RISK -- Investments in foreign securities Armada International Equity Fund
denominated in foreign currencies involve Armada Small Cap Value Fund
additional risks, including: Armada Small Cap Growth Fund
Armada Equity Growth Fund
- - The value of a Fund's assets measured in U.S. Armada Tax Managed Equity Fund
dollars may be affected by changes in currency Armada Core Equity Fund
rates and in exchange control regulations. Armada Equity Income Fund
- - A Fund may incur substantial costs in connection Armada Balanced Allocation Fund
with conversions between various currencies. Armada Total Return Advantage Fund
- - A Fund may be unable to hedge against possible Armada Intermediate Bond Fund
variations in foreign exchange rates or to hedge Armada Enhanced Income Fund
a specific security transaction or portfolio Armada Mid Cap Growth Fund
position. Armada U.S. Government Income Fund
- - Only a limited market currently exists for
hedging transactions relating to currencies in
certain emerging markets.
HEDGING RISK -- Hedging is a strategy designed to Armada International Equity Fund
offset investment risks. Hedging activities Armada Small Cap Value Fund
include, among other things, the use of forwards, Armada Small Cap Growth Fund
options and futures. There are risks associated Armada Equity Growth Fund
with hedging activities, including: Armada Tax Managed Equity Fund
Armada Core Equity Fund
- - The success of a hedging strategy may depend on Armada Equity Index Fund
an ability to predict movements in the prices of Armada Equity Income Fund
individual securities, fluctuations in markets, and Armada Balanced Allocation Fund
movements in interest and currency exchange rates. Armada Total Return Advantage Fund
- - There may be an imperfect or no correlation Armada Bond Fund
between the changes in market value of the securities Armada Intermediate Bond Fund
held by the Fund or the currencies in which those Armada GNMA Fund
securities are denominated and the prices of forward Armada Enhanced Income Fund
contracts, futures and options on futures. Armada Mid Cap Growth Fund
- - There may not be a liquid secondary market for a Armada U.S. Government Income Fund
futures contract or option. Armada Michigan Municipal Bond Fund
- - Trading restrictions or limitations may be Armada Treasury Plus Money Market Fund
imposed by an exchange, and government regulations
may restrict trading in currencies, futures contracts
and options.
LEVERAGING RISK -- Leveraging activities include, Armada International Equity Fund
among other things, borrowing and the use of short Armada Small Cap Value Fund
sales, options and futures. There are risks Armada Small Cap Growth Fund
associated with leveraging activities, including: Armada Equity Growth Fund
Armada Tax Managed Equity Fund
- - A fund experiencing losses over certain ranges in Armada Core Equity Fund
the market that exceed losses experienced by a Armada Equity Index Fund
non-leveraged Fund. Armada Equity Income Fund
- - There may be an imperfect or no correlation between Armada Balanced Allocation Fund
the changes in market value of the securities Armada Total Return Advantage Fund
held by a fund and the prices of futures and options Armada Intermediate Bond Fund
on futures. Armada GNMA Fund
- - Although the funds will only purchase Armada Enhanced Income Fund
exchange-traded futures and options, due to market Armada Ohio Municipal Money Market Fund
conditions there may not be a liquid secondary market Armada Pennsylvania Tax Exempt Money Market Fund
for a futures contract or option. As a result, the Armada Tax Exempt Money Market Fund
funds may be unable to close out their futures or Armada Money Market Fund
options contracts at a time which is advantageous. Armada Government Money Market Fund
- - Trading restrictions or limitations may be imposed Armada Mid Cap Growth Fund
by an exchange, and government regulations Armada U.S. Government Income Fund
may restrict trading in futures contracts and Armada Michigan Municipal Bond Fund
options. Armada Treasury Plus Money Market Fund
Page 60 of 70
<PAGE>
In addition, the following leveraged
instruments are subject to certain
specific risks:
Derivatives Risk -- The Funds use derivatives to Armada International Equity Fund
attempt to achieve their investment objectives, Armada Small Cap Value Fund
while at the same time maintaining liquidity. To Armada Small Cap Growth Fund
collateralize (or cover) these derivatives Armada Equity Growth Fund
transactions, the Funds hold cash or U.S. Armada Tax Managed Equity Fund
government securities. Armada Core Equity Fund
Armada Equity Index Fund
Armada Equity Income Fund
Armada Balanced Allocation Fund
Armada Total Return Advantage Fund
Armada Bond Fund
Armada Intermediate Bond Fund
Armada GNMA Fund
Armada Enhanced Income Fund
Armada Ohio Municipal Money Market Fund
Armada Pennsylvania Tax Exempt Money Market Fund
Armada Tax Exempt Money Market Fund
Armada Money Market Fund
Armada Government Money Market Fund
Armada Treasury Money Market Fund
Armada Mid Cap Growth Fund
Armada U.S. Government Income Fund
Armada Treasury Plus Money Market Fund
FUTURES -- Futures contracts and options on Armada International Equity Fund
futures contracts provide for the future sale by Armada Small Cap Value Fund
one party and purchase by another party of a Armada Small Cap Growth Fund
specified amount of a specific security at a Armada Equity Growth Fund
specified future time and at a specified price. Armada Tax Managed Equity Fund
An option on a futures contract gives the Armada Equity Index Fund
purchaser the right, in exchange for a premium, Armada Equity Income Fund
to assume a position in a futures contract at a Armada Balanced Allocation Fund
specified exercise price during the term of the Armada Total Return Advantage Fund
option. Index futures are futures contracts for Armada Bond Fund
various indices that are traded on registered Armada GNMA Fund
securities exchanges. Armada Enhanced Income Fund
Armada Mid Cap Growth Fund
The Funds may use futures contracts and related Armada U.S. Government Income Fund
options for bona fide hedging purposes to offset
changes in the value of securities held or
expected to be acquired. They may also be used
to gain exposure to a particular market or
instrument, to create a synthetic money market
position, and for certain other tax-related
purposes. The Funds will only enter into futures
contracts traded on a national futures exchange
or board of trade.
OPTIONS-- The buyer of an option acquires the Armada International Equity Fund
right to buy (a call option) or sell (a put Armada Small Cap Value Fund
option) a certain quantity of a security (the Armada Small Cap Growth Fund
underlying security) or instrument at a certain Armada Equity Growth Fund
price up to a specified point in time. The Armada Tax Managed Equity Fund
seller or writer of an option is obligated to Armada Core Equity Fund
sell (a call option) or buy (a put option) the Armada Equity Income Fund
underlying security. When writing (selling) call Armada Balanced Allocation Fund
options on securities, the Funds may cover its Armada Total Return Advantage Fund
position by owning the underlying security on Armada Bond Fund
which the option is written or by owning a call Armada GNMA Fund
option on the underlying security. Armada Enhanced Income Fund
Alternatively, the Funds may cover its position Armada Mid Cap Growth Fund
by maintaining in a segregated account cash or Armada U.S. Government Income Fund
liquid securities equal in value to the exercise Armada Michigan Municipal Bond Fund
price of the call option written by the Funds.
Because option premiums paid or
received by the Funds are small
in relation to the market value
of the investments underlying
the options, buying and selling
put and call options can be
more speculative than investing
directly in securities.
SHORT SALES-- Short sales are transactions in Armada Balanced Allocation Fund
which a Fund sells a security it does not own. Armada GNMA Fund
To complete a short sale, a Fund must borrow the Armada Mid Cap Growth Fund
security to deliver to the buyer. The Fund is Armada U.S. Government Income Fund
then obligated to replace the borrowed security
by purchasing the security at the market price at
the time of replacement. This price may be more
or less than the price at which the security was
sold by the Fund.
Page 61 of 70
<PAGE>
REAL ESTATE INVESTING -- The Fund's investments in Armada Mid Cap Growth Fund
the securities of real estate investment trusts
(REITs) and companies principally engaged in the
real estate industry may subject the Fund to the
risks associated with the direct ownership of real
estate. Risks commonly associated with the direct
ownership of real estate include fluctuations in
the value of underlying properties and defaults by
borrowers or tenants. In addition to these risks,
REITs are dependent on specialized management
skills and some REITs may have investments in
relatively few properties, or in a small geographic
area or a single type of property. These factors
may increase the volatility of the Fund's
investments in REITs.
REGIONAL RISK -- To the extent that the/a Fund's Armada Ohio Tax Exempt Bond Fund
investments are concentrated in a specific Armada Pennsylvania Municipal Bond Fund
geographic region, the Fund may be subject to the Armada Ohio Municipal Money Market Fund
political and other developments affecting that Armada Pennsylvania Tax Exempt Money Market Fund
region. Regional economies are often closely Armada Money Market Fund
interrelated, and political and economic Armada Michigan Municipal Bond Fund
developments affecting one region, country or state
often affect other regions, countries or states,
thus subjecting a Fund to additional risks.
TRACKING ERROR RISK -- Factors such as Fund Armada Equity Index Fund
expenses, imperfect correlation between the Fund's Armada Total Return Advantage Fund
investments and those of their benchmarks, rounding Armada Bond Fund
of share prices, changes to the benchmark, Armada Intermediate Bond Fund
regulatory policies, and leverage, may affect their Armada GNMA Fund
ability to achieve perfect correlation. The Armada Enhanced Income Fund
magnitude of any tracking error may be affected by
a higher portfolio turnover rate. Because an index
is just a composite of the prices of the securities
it represents rather than an actual portfolio of
those securities, an index will have no expenses.
As a result, a Fund, which will have expenses such
as taxes, custody, management fees and other
operational costs, and brokerage, may not achieve
its investment objective of accurately correlating
to an index.
YEAR 2000 RISK -- The Funds depend on the smooth All Funds
functioning of computer systems in almost every
aspect of their business. Like other mutual funds,
businesses and individuals around the world, the
Funds could be adversely affected if the computer
systems used by its service providers do not properly
process dates on and after January 1, 2000, and
distinguish between the year 2000 and the year 1900.
The Funds have asked their service providers whether
they expect to have their computer systems adjusted
for the year 2000 transition, and is seeking
assurances from each service provider that they are
devoting significant resources to prevent material
adverse consequences to the Funds. While it is
likely that such assurances will be obtained, the
Funds and their shareholders may experience losses if
these assurances prove to be incorrect or as a result
of year 2000 computer difficulties experienced by
issuers of portfolio securities or third parties,
such as custodians, banks, broker-dealers or others
with which the Funds do business. In addition, to
the extent that the operations of issuers of
securities held by a Fund are impaired by the year
2000 transition, or prices of securities held by a
Fund decline as a result of real or perceived
problems relating to the year 2000, the value of such
Fund's shares may be materially affected.
Furthermore, many foreign countries are not as Armada International Equity Fund
prepared as the U.S. for the year 2000 transition. Armada Small Cap Value Fund
As a result, computer difficulties in foreign markets Armada Small Cap Growth Fund
and with foreign institutions as a result of the year Armada Equity Growth Fund
2000 may add to the possibility of losses to the Armada Tax Managed Equity Fund
Funds and their shareholders. Armada Core Equity Fund
Armada Equity Income Fund
Armada Balanced Allocation Fund
Armada Total Return Advantage Fund
Armada Intermediate Bond Fund
Armada Enhanced Income Fund
Armada Mid Cap Growth Fund
Armada U.S. Government Income Fund
</TABLE>
Page 62 of 70
<PAGE>
EACH FUND'S OTHER INVESTMENTS
In addition to the investments and strategies described in this prospectus, each
Fund also may invest in other securities, use other strategies and engage in
other investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information. Of course, the Trust cannot guarantee that any Fund will
achieve its investment goal.
The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic, market, political or
other conditions, or for temporary defensive or liquidity purposes, each Fund
(except for the money market funds) may invest up to 100% of its assets in
short-term high quality debt instruments that would not ordinarily be
consistent with a Fund's principal investment strategies. A Fund will do so
only if the Adviser or Sub-Adviser believes that the risk of loss outweighs
the opportunity for achieving a Fund's investment objective.
INVESTMENT ADVISER, SUB-ADVISER AND INVESTMENT TEAM
***
The Investment Adviser makes investment decisions for the Funds and continuously
reviews, supervises and administers each Fund's respective investment program.
The Investment Adviser oversees the Sub-Adviser to ensure compliance with the
Funds' investment policies and guidelines, and monitors the Sub-Adviser's
adherence to its investment style. The Adviser pays the Sub-Adviser out of the
Investment Advisory fees it receives (described below).
The Board of Trustees of the Trust supervises the Adviser and establishes
policies that the Adviser must follow in its management activities.
National City Investment Management Company ("IMC"), with its principal offices
at 1900 East Ninth Street, Cleveland, Ohio 44114, serves as Adviser to the
Funds. On March 31, 1999, IMC had approximately $23.7 billion in assets under
management.
IMC utilizes a team approach for management of the Funds. No one person is
primarily responsible for making investment recommendations to the team. In the
case of the Armada Core Equity and the Armada Total Return Advantage Funds,
National Asset Management Corporation ("NAM") serves as Sub-Adviser and manages
these Funds on a day-to-day basis; NAM selects, buys and sells the securities of
these Funds under the supervision of the Adviser and the Board of Trustees.
Page 63 of 70
<PAGE>
The table below shows the IMC management team responsible for each Fund as well
as the advisory fees IMC received for each Fund for the fiscal period ended May
31, 1999.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
ADVISORY FEES PAID AS A
PERCENTAGE OF AVERAGE NET
ASSETS FOR THE FISCAL YEAR
FUND NAME MANAGEMENT TEAM/ INVESTMENT ENDED MAY 31, 1999
ADVISER
- ----------------------------------------- ------------------------------------- -----------------------------
<S> <C> <C>
International Equity Fund International Equity Team
- ----------------------------------------- ------------------------------------- -----------------------------
Small Cap Value Fund Equity Value Team
- ----------------------------------------- ------------------------------------- -----------------------------
Small Cap Growth Fund Small Cap Growth Team
- ----------------------------------------- ------------------------------------- -----------------------------
Equity Growth Fund Large Cap Growth Team
- ----------------------------------------- ------------------------------------- -----------------------------
Tax Managed Equity Fund Large Cap Growth Team
- ----------------------------------------- ------------------------------------- -----------------------------
National Asset Management
Core Equity Fund (sub-adviser)
- ----------------------------------------- ------------------------------------- -----------------------------
Equity Index Fund Equity Value Team
- ----------------------------------------- ------------------------------------- -----------------------------
Equity Income Fund Equity Value Team
- ----------------------------------------- ------------------------------------- -----------------------------
Large Cap Growth and Fixed
Balanced Allocation Fund Income Teams
- ----------------------------------------- ------------------------------------- -----------------------------
National Asset Management
Total Return Advantage Team (sub-adviser)
- ----------------------------------------- ------------------------------------- -----------------------------
Bond Fund Fixed Income Team
- ----------------------------------------- ------------------------------------- -----------------------------
Intermediate Bond Fund Fixed Income Team
- ----------------------------------------- ------------------------------------- -----------------------------
GNMA Fund Fixed Income Team
- ----------------------------------------- ------------------------------------- -----------------------------
Enhanced Income Fund Fixed Income Team
- ----------------------------------------- ------------------------------------- -----------------------------
Ohio Tax Exempt Bond Fund Tax Free Fixed Income Team
- ----------------------------------------- ------------------------------------- -----------------------------
Pennsylvania Municipal Bond Fund Tax Free Fixed Income Team
- ----------------------------------------- ------------------------------------- -----------------------------
National Tax Exempt Bond Fund Tax Free Fixed Income Team
- ----------------------------------------- ------------------------------------- -----------------------------
Ohio Municipal Money Market Fund [ ] [ ]%
- ----------------------------------------- ------------------------------------- -----------------------------
Pennsylvania Tax Exempt Money [ ] [ ]%
Market Fund
- ----------------------------------------- ------------------------------------- -----------------------------
Tax Exempt Money Market Fund [ ] [ ]%
- ----------------------------------------- ------------------------------------- -----------------------------
Money Market Fund [ ] [ ]%
- ----------------------------------------- ------------------------------------- -----------------------------
Government Money Market Fund [ ] [ ]%
- ----------------------------------------- ------------------------------------- -----------------------------
Treasury Money Market Fund [ ] [ ]%
- ----------------------------------------- ------------------------------------- -----------------------------
Fund has not yet commenced
Mid Cap Growth Fund Mid Cap Growth Team operations
- ----------------------------------------- ------------------------------------- -----------------------------
Fund has not yet commenced
Large Cap Ultra Fund Large Cap Growth Team operations
- ----------------------------------------- ------------------------------------- -----------------------------
Fund has not yet commenced
U.S. Government Income Fund Fixed Income Team operations
- ----------------------------------------- ------------------------------------- -----------------------------
Fund has not yet commenced
Michigan Municipal Bond Fund Tax Free Fixed Income Team operations
- ----------------------------------------- ------------------------------------- -----------------------------
</TABLE>
The Treasury Plus Money Market Fund has not yet commenced operations.
Page 64 of 70
<PAGE>
***
PURCHASING, SELLING AND EXCHANGING FUND SHARES
This section tells you how to buy, sell (sometimes called "redeem") or exchange
Class I Shares of the Funds.
CLASS I SHARES HAVE NO SALES CHARGE AND NO MINIMUM INITIAL INVESTMENT
Class I Shares are for financial institutions investing for their own or their
customers' accounts. For information on how to open an account and set up
procedures for placing transactions call 1-800-622-FUND (3863).
HOW TO PURCHASE FUND SHARES
***
You may buy shares through accounts with brokers and other institutions that are
authorized to place trades in Fund shares for their customers. If you invest
through an authorized institution, you will have to follow its procedures. Your
institution may charge a fee for its services, in addition to the fees charged
by the Trust. You will also generally have to address your correspondence or
questions regarding a Fund to your institution.
***
GENERAL INFORMATION
You may purchase shares on any day that the New York Stock Exchange is open for
business (a "Business Day").
The Trust may reject any purchase order if it is determined that accepting the
order would not be in the best interests of the Fund or its shareholders.
The price per share (the offering price) will be the net asset value per
share (NAV) next determined after a Fund receives your purchase order. The
NAV per share of the Armada Money Market and Government Money Market Funds is
calculated first at 3:00 p.m. (Eastern time), then as of the close of trading
of the New York Stock Exchange. The NAV per share of the Armada Treasury
Money Market, Tax Exempt Money Market, Pennsylvania Tax Exempt Money Market,
Ohio Municipal Money Market and Treasury Plus 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 New York Stock Exchange.
Each bond and equity fund calculates its NAV once each Business Day at the
regularly-scheduled close of normal trading on the New York Stock Exchange
(normally, 4:00 p.m. (Eastern time)). So, for you to receive the current
Business Day's NAV, generally a Fund must receive your purchase order before
4:00 p.m. (Eastern time).
So, for you to be eligible to receive dividends declared on the day you submit
your purchase order, generally a Fund must receive your order before 4:00 p.m.
(Eastern time) and federal funds (readily available funds) before 2:00 p.m.
(Eastern time).
Purchase orders for shares of the Armada Money Market and Government Money
Market Funds which are received by the Transfer Agent by 3:00 p.m. (Eastern
time) are processed that day. Purchase orders for shares of the Armada
Treasury Money Market, Tax Exempt Money Market, Pennsylvania Tax Exempt Money
Market, Ohio Municipal Money Market and Treasury Plus Money Market Funds
which are received by the Transfer Agent by 1:00 p.m. (Eastern time) are also
processed that day.
Page 65 of 70
<PAGE>
HOW WE CALCULATE NAV
NAV for one Fund share is the value of that share's portion of all of the assets
in the Fund less liabilities and class expenses.
In calculating NAV, a Fund generally values its investment portfolio at market
price (except the Armada Ohio Municipal Money Market Fund, Armada Pennsylvania
Tax Exempt Money Market Fund, Armada Tax Exempt Money Market Fund, Armada Money
Market Fund, Armada Government Money Market Fund, Armada Treasury Money Market
Fund, and the Armada Treasury Plus Money Market Fund). If market prices are
unavailable or a Fund thinks that they are unreliable, fair value prices may be
determined in good faith using methods approved by the Board of Trustees.
In calculating NAV for the Armada Ohio Municipal Money Market Fund, Armada
Pennsylvania Tax Exempt Money Market Fund, Armada Tax Exempt Money Market Fund,
Armada Money Market Fund, Armada Government Money Market Fund, Armada Treasury
Money Market Fund, and the Armada Treasury Plus Money Market Fund, we generally
value a Fund's investment portfolio using the amortized cost valuation method,
which is described in detail in our Statement of Additional Information. If this
method is determined to be unreliable during certain market conditions or for
other reasons, a Fund may value its portfolio at market price or fair value
prices may be determined in good faith using methods approved by the Board of
Trustees.
Some Funds hold securities that are listed on foreign exchanges. These
securities may trade on weekends or other days when the Funds do not calculate
NAV. As a result, the market value of these Fund's investments may change on
days when you cannot purchase or sell Fund shares.
HOW TO SELL YOUR FUND SHARES
Holders of Class I Shares may sell shares by following procedures established
when they opened their account or accounts. If you have questions, call
1-800-622-FUND (3863).
If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares.
The sale price of each share will be the next NAV determined after the Fund
receives your request.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within seven Business Days after we
receive your request. Your proceeds can be wired to your bank account (subject
to a $$[VAR:Selling.SaleProceeds.WireFee] fee) or sent to you by check. IF YOU
RECENTLY PURCHASED YOUR SHARES BY CHECK [VAR: OR THROUGH ACH], REDEMPTION
PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO
15 DAYS FROM YOUR DATE OF PURCHASE).
REDEMPTIONS IN KIND
We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Fund's remaining shareholders) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). It is highly unlikely that your shares would ever be
redeemed in kind, but if they were you would probably have to pay transaction
costs to sell the securities distributed to you, as well as taxes on any capital
gains from the sale as with any redemption.
Page 66 of 70
<PAGE>
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
A Fund may suspend your right to sell your shares if the New York Stock Exchange
restricts trading, the SEC declares an emergency or for other reasons. More
information about this is in our Statement of Additional Information.
DISTRIBUTION OF FUND SHARES
Each Fund has adopted a distribution plan [under Rule 12b-1, pursuant to the
1940 Act, as amended] that allows each Fund to pay distribution and service fees
for the sale and distribution of its shares, and for services provided to
shareholders. Because these fees are paid out of a Fund's assets continuously,
over time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
Distribution fees, as a percentage of average daily net assets are as follows:
Armada International Equity Fund ______%
Armada Small Cap Value Fund ______%
Armada Small Cap Growth Fund ______%
Armada Equity Growth Fund ______%
Armada Tax Managed Equity Fund ______%
Armada Core Equity Fund ______%
Armada Equity Index Fund ______%
Armada Equity Income Fund ______%
Armada Balanced Allocation Fund ______%
Armada Total Return Advantage Fund ______%
Armada Bond Fund ______%
Armada Intermediate Bond Fund ______%
Armada GNMA Fund ______%
Armada Enhanced Income Fund ______%
Armada Ohio Tax Exempt Bond Fund ______%
Armada Pennsylvania Municipal Bond Fund ______%
Armada National Tax Exempt Bond Fund ______%
Armada Ohio Municipal Money Market Fund ______%
Armada Pennsylvania Tax Exempt Money Market Fund ______%
Armada Tax Exempt Money Market Fund ______%
Armada Money Market Fund ______%
Armada Government Money Market Fund ______%
Armada Treasury Money Market Fund ______%
Armada Mid Cap Growth Fund Not yet in operation
Armada Large Cap Ultra Fund Not yet in operation
Armada U.S. Government Income Fund Not yet in operation
Armada Michigan Municipal Bond Fund Not yet in operation
Armada Treasury Plus Money Market Fund Not yet in operation
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor from any sales charge it receives or from any other source available
to it. Under any such program, the Distributor may provide incentives, in the
form of cash or other compensation, including merchandise, airline vouchers,
trips and vacation packages, to dealers selling shares of a Fund.
DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes its income as follows:
Armada International Equity Fund Annually
Armada Small Cap Value Fund Annually
Armada Small Cap Growth Fund Annually
Armada Equity Growth Fund Quarterly
Armada Tax Managed Equity Fund Quarterly
Armada Core Equity Fund Quarterly
Armada Equity Index Fund Quarterly
Armada Equity Income Fund Quarterly
Armada Balanced Allocation Fund Quarterly
Armada Total Return Advantage Fund Monthly
Armada Bond Fund Monthly
Armada Intermediate Bond Fund Monthly
Armada GNMA Fund Monthly
Armada Enhanced Income Fund Monthly
Armada Ohio Tax Exempt Bond Fund Monthly
Armada Pennsylvania Municipal Bond Fund Monthly
Armada National Tax Exempt Bond Fund Monthly
Armada Ohio Municipal Money Market Fund Monthly
Armada Pennsylvania Tax Exempt Money Market Fund Monthly
Armada Tax Exempt Money Market Fund Monthly
Armada Money Market Fund Monthly
Armada Government Money Market Fund Monthly
Armada Treasury Money Market Fund Monthly
Armada Mid Cap Growth Fund Not yet in operation
Armada Large Cap Ultra Fund Not yet in operation
Armada U.S. Government Income Fund Not yet in operation
Armada Michigan Municipal Bond Fund Not yet in operation
Armada Treasury Plus Money Market Fund Not yet in operation
Each Fund makes distributions of capital gains, if any, at least annually. If
you own Fund shares on a Fund's record date, you will be entitled to receive the
distribution.
Page 67 of 70
<PAGE>
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Fund in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the Fund
receives your written notice. To cancel your election, simply send the Fund
written notice.
TAXES
FEDERAL TAXES
Each Fund contemplates declaring as dividends each year all or substantially
all of its taxable income, including its net capital gain (the excess of
long-term capital gain over short-term capital loss). Distributions
attributable to the net capital gain of a Fund will be taxable to you as
long-term capital gain, regardless of how long you have held your shares.
Other Fund distributions (other than exempt-interest dividends, discussed
below) will generally be taxable as ordinary income. You will be subject to
income tax on Fund distributions regardless of whether they are paid in cash
or reinvested in additional shares. You will be notified annually of the tax
status of distributions to you.
In the case of any Fund other than a money-market Fund, you should note that
if you purchase shares just before a distribution, the purchase price will
reflect the amount of the upcoming distribution, but you will be taxable on
the entire amount of the distribution received, even though, as an economic
matter, the distribution simply constitutes a return of capital. This is
known as "buying into a dividend."
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund, based on the
difference between your tax basis in the shares and the amount you receive
for them. (To aid in computing your tax basis, you generally should retain
your account statements for the periods during which you held shares.) Any
loss realized on shares held for six months or less will be treated as a
long-term capital loss to the extent of any capital gain dividends that were
received on the shares.
The one major exception to these tax principles is that distributions on, and
sales, exchanges and redemptions of, shares held in an IRA (or other
tax-qualified plan) will not be currently taxable.
It is expected that the Armada International Equity Fund will be subject to
foreign withholding taxes with respect to dividends or interest received from
sources in foreign countries. The Armada International Equity Fund may make
an election to treat a proportionate amount of such taxes as constituting a
distribution to each shareholder, which would allow each shareholder either
(1) to credit such proportionate amount of taxes against U.S. federal income
tax liability or (2) to take such amount as an itemized deduction.
The Armada Tax Exempt Money Market Fund, Armada Pennsylvania Tax Exempt Money
Market Fund, Armada Ohio Municipal Money Market Fund, Armada Ohio Tax Exempt
Bond Fund, Armada Pennsylvania Municipal Bond Fund, Armada National Tax
Exempt Bond Fund, and Armada Michigan Municipal Bond Fund (the "Tax-Exempt
Funds") anticipate that substantially all of their income dividends will be
"exempt interest dividends," which are exempt from federal income taxes.
However, some dividends will be taxable, such as dividends that are derived
from occasional taxable investments, and in the case of other than money
market Funds, distributions of short and long-term capital gains. Interest
on indebtedness incurred by a shareholder to purchase or carry shares of any
Tax-Exempt Fund generally will not be deductible for federal income tax
purposes.
You should note that a portion of the exempt-interest dividends paid by the
Tax-Exempt Funds may constitute an item of tax preference for purposes of
determining federal alternative minimum tax liability. Exempt-interest
dividends will also be considered along with other adjusted gross income in
determining whether any Social Security or railroad retirement payments
received by you are subject to federal income taxes.
If you receive an exempt-interest dividend with respect to any share and the
share is held by you for six months or less, any loss on the sale or
exchange of the share will be disallowed to the extent of such dividend
amount.
The foregoing is only a summary of certain tax considerations under current
law, which may be subject to change in the future. Shareholders who are
nonresident aliens, foreign trusts or estates, or foreign corporations or
partnerships, may be subject to different United States federal income tax
treatment. You should consult your tax adviser for further information
regarding federal, state, local and/or foreign tax consequences relevant to
your specific situation.
STATE AND LOCAL TAXES
Shareowners may also be subject to state and local taxes on distributions and
redemptions. State income taxes may not apply, however, to the portions of
each Fund's distributions, if any, that are attributable to interest on
Federal Securities or interest on securities of the particular state or
localities within the state. The Armada Pennsylvania Tax Exempt Money Market
Fund and Armada Pennsylvania Municipal Bond Fund intend to distribute income
that is exempt from Pennsylvania personal income taxes. The Armada Ohio Tax
Exempt Bond Fund and Armada Ohio Municipal Money Market Fund intend to
distribute income that is exempt from Ohio personal income taxes. The Armada
Michigan Municipal Bond Fund intends to distribute income that is exempt from
Michigan income taxes. Shareowners should consult their tax advisers
regarding the tax status of distributions in their state and locality.
Each Fund may invest a portion of its assets in securities that generate
taxable income for federal or state income taxes. Income exempt from federal
tax may be subject to state and local taxes. Any capital gains distributed
by these Funds may be taxable.
The Funds use a tax management technique known as "highest in, first out."
Using this technique, the portfolio holdings that have experienced the
smallest gain or largest loss are sold first in an effort to minimize capital
gains and enhance after-tax returns.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
Page 68 of 70
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FINANCIAL HIGHLIGHTS
The tables that follow present performance information about Class I Shares of
each Fund. This information is intended to help you understand each Fund's
financial performance for the past five years, or, if shorter, the period of the
Fund's operations. Some of this information reflects financial information for a
single Fund share. The total returns in the table represent the rate that you
would have earned (or lost) on an investment in a Fund, assuming you reinvested
all of your dividends and distributions. This information has been audited by
Ernst & Young LLP, independent public accountants. Their report, along with each
Fund's financial statements, appears in the annual report that accompanies our
Statement of Additional Information. You can obtain the annual report, which
contains more performance information, at no charge by calling 1-800-622-FUND
(3863)
Page 69 of 70
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ARMADA FUNDS
INVESTMENT ADVISER
National City Investment Management Company
1900 East Ninth Street
Cleveland, Ohio 44114
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
LEGAL COUNSEL
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103-6996
More information about each Fund is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated September ___, 1999, includes detailed information about the
Armada Funds. The SAI is on file with the SEC and is incorporated by reference
into this prospectus. This means that the SAI, for legal purposes, is a part of
this prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list each Fund's holdings and contain information from the Fund's
managers about strategies, and recent market conditions and trends. The reports
also contain detailed financial information about the Funds.
TO OBTAIN MORE INFORMATION:
BY TELEPHONE: Call 1-800-622-FUND (3863)
BY MAIL: Write to us
P.O. Box 8421
Boston, MA 02266-8421
BY E-MAIL: FUND EMAIL ADDRESS
BY INTERNET: www.armadafunds.com
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about the Armada Funds, from the SEC's website
("http://www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009. The Armada Funds' Investment Company Act registration
number is 811-4416.
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<PAGE>
ARMADA FUNDS
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER __, 1999
ARMADA INTERNATIONAL EQUITY FUND
ARMADA SMALL CAP VALUE FUND
ARMADA SMALL CAP GROWTH FUND
ARMADA EQUITY GROWTH FUND
ARMADA TAX MANAGED EQUITY FUND
ARMADA CORE EQUITY FUND
ARMADA EQUITY INDEX FUND
ARMADA EQUITY INCOME FUND
ARMADA BALANCED ALLOCATION FUND
ARMADA TOTAL RETURN ADVANTAGE FUND
ARMADA BOND FUND
ARMADA INTERMEDIATE BOND FUND
ARMADA GNMA FUND
ARMADA ENHANCED INCOME FUND
ARMADA OHIO TAX EXEMPT BOND FUND
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
ARMADA NATIONAL TAX EXEMPT BOND FUND
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
ARMADA TAX EXEMPT MONEY MARKET FUND
ARMADA MONEY MARKET FUND
ARMADA GOVERNMENT MONEY MARKET FUND
ARMADA TREASURY MONEY MARKET FUND
ARMADA MID CAP GROWTH FUND
ARMADA LARGE CAP ULTRA FUND
ARMADA U.S. GOVERNMENT INCOME FUND
ARMADA MICHIGAN MUNICIPAL BOND FUND
ARMADA TREASURY PLUS 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 __, 1999 (the "Prospectus"). A copy of the
Prospectus may be obtained by calling or writing the Trust at 1-800-622-FUND
(3863), One Freedom Valley Drive, Oaks, Pennsylvania 19456.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION...............................................................1
INVESTMENT OBJECTIVE AND POLICIES.................................................................2
INVESTMENT LIMITATIONS...........................................................................67
NET ASSET VALUE..................................................................................70
DIVIDENDS........................................................................................71
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...................................................71
DESCRIPTION OF SHARES............................................................................83
ADDITIONAL INFORMATION CONCERNING TAXES..........................................................85
TRUSTEES AND OFFICERS............................................................................89
ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN SERVICES AND TRANSFER AGENCY AGREEMENTS........93
SHAREHOLDER SERVICES PLANS......................................................................105
PORTFOLIO TRANSACTIONS..........................................................................105
AUDITORS........................................................................................107
COUNSEL.........................................................................................108
YIELD AND PERFORMANCE INFORMATION...............................................................108
STANDARDIZED YIELD QUOTATIONS...................................................................116
MISCELLANEOUS...................................................................................121
FINANCIAL STATEMENTS............................................................................146
APPENDIX A......................................................................................A-1
APPENDIX B......................................................................................B-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:
International Equity, Small Cap Value, Small Cap Growth, Equity Growth, Tax
Managed Equity, Core Equity, Equity Income, Total Return Advantage, Mid Cap
Growth, and Large Cap Ultra Funds, (collectively, the "Equity Funds"); the
Balanced Allocation Fund; the Bond (formerly, the Intermediate Government
Fund), Intermediate Bond (formerly the "Fixed Income Fund"), GNMA, Enhanced
Income and Government Income Funds, (collectively, the "Fixed Income Funds");
(Ohio Municipal Money Market Fund, Pennsylvania Tax Exempt Money Market,
"Pennsylvania Tax Exempt Fund"), Tax Exempt Money Market, Money Market,
Government Money Market, and Treasury Money Market and Treasury Plus Money
Market Funds (collectively, the "Money Market Funds"); Ohio Tax Exempt Bond,
Pennsylvania Municipal Bond, Michigan Municipal Bond and National Tax Exempt
Bond Funds (collectively "The Funds"). The information contained in this
Statement of Additional Information expands upon matters discussed in the
Prospectus. No investment in shares of the Fund should be made without first
reading the Prospectus.
The Trust was organized as a Massachusetts business trust on January
28, 1986. The Trust is a series fund authorized to issue the separate classes or
series of shares of beneficial interest.
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 A Shares of beneficial interest.
The Bond, GNMA and Pennsylvania Municipal Bond Funds commenced
operations on August 10, 1994 as separate investment portfolios (the
"Predecessor Intermediate Government Fund, "Predecessor GNMA Fund", and
Predecessor Pennsylvania Tax Exempt Bond Fund," collectively the "Predecessor
Funds") of Inventor Funds, Inc. which was organized as a Maryland corporation.
On September 9, 1996, the Predecessor Funds were reorganized as new portfolios
of Armada. Prior to the reorganization, the Predecessor Funds offered and sold
shares of stock that were similar to Armada's A shares of beneficial interest.
-1-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
ADDITIONAL INFORMATION ON FUND MANAGEMENT
Further information on National City Investment Management Company's
("IMC" or the "Adviser") 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, "Yield and
Performance Information" below.
Attached to this Statement of Additional Information is Appendix A
which contains descriptions of the rating symbols used by Standard & Poor's
Rating Group ("S&P"), Fitch IBCA, Inc. ("Fitch"), Duff & Phelps Credit Rating
Co. ("Duff"), and Moody's Investors Service, Inc. ("Moody's") for securities
which may be held by the Funds.
ADDITIONAL INFORMATION ABOUT THE FUNDS
The following information supplements and should be read in
conjunction with the principal strategies and risk disclosure relating to the
Fund in the Prospectuses.
ARMADA INTERNATIONAL EQUITY FUND
The Fund seeks to achieve its investment objective by investing, under
normal market conditions, at least 80% of its total assets in equity securities
of foreign issuers. The Fund's assets normally will be invested in the
securities of issuers located in at least three foreign countries. Foreign
investments may also include debt obligations issued or guaranteed by foreign
governments or their agencies, authorities, instrumentalities or political
subdivisions, including a foreign state, province or municipality. The Adviser
does not presently intend to invest in common stock of domestic companies.
The Fund will invest primarily in equity securities, including common
and preferred stocks, rights, warrants, securities convertible into common
stocks and American Depository Receipts ("ADRs") of companies included in the
Morgan Stanley Capital International Europe, Australia, Far East ("EAFE") Index,
a broadly diversified international index consisting of more than 1,000 equity
securities of companies located in Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia, the
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, and the
United Kingdom. The Fund, however, is not an "index" fund, and is neither
sponsored by nor affiliated with Morgan Stanley Capital International. The Fund
does not anticipate making investments in markets where, in the judgment of the
Adviser, property rights are not defined and supported by adequate legal
infrastructure.
More than 25% of the Fund's assets may be invested in the securities
of issuers located in the same country. Investment in a particular country of
25% or more of the Fund's total assets will make the Fund's performance more
dependent upon the political and economic circumstances of that country than a
mutual fund more widely diversified among issuers in
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different countries. Criteria for determining the appropriate distribution of
investments among countries may include relative valuation, growth prospects,
and fiscal, monetary, and regulatory government policies. See "Additional
Information about Portfolio Instruments -- Foreign Securities and Currencies"
below.
ARMADA SMALL CAP VALUE FUND
Under normal conditions, at least 80% of the value of the Fund's total
assets will be invested in equity securities of companies with market
capitalizations comparable to those of companies in the Russell 2000 Value
Index. The Fund will be managed with a value approach, exhibiting aggregate
valuation characteristics such as price/earnings, price/book, and price
cash/flow ratios which are at a discount to the market averages. Additional
factors such as private market value, balance sheet strength, and long term
earnings potential are also considered in stock selection. See "Special Risk
Factors -- Small Capitalization Stocks" below.
ARMADA SMALL CAP GROWTH FUND
The Fund will normally invest at least 80% of its total assets in
equity securities of companies with stock market capitalizations comparable to
that of companies in the Russell 2000 Growth Index. The Adviser will seek
companies with above-average growth prospects. Factors considered in selecting
such issuers include participation in a fast growing industry, a strategic niche
position in a specialized market, and fundamental value. The Adviser will also
consider the relationship between price and book value, and other factors such
as trading volume and bid-ask spreads in an effort to allow the Fund to achieve
diversification. See "Special Risk Factors -- Small Capitalization Stocks"
below.
SPECIAL RISK FACTORS FOR SMALL CAPITALIZATION STOCKS
Securities held by the Small Cap Value and Small Cap Growth Funds
generally will be issued by public companies with small capitalizations relative
to those which predominate the major market indices, such as the S&P's 500 or
the Dow Jones Industrial Average. Securities of these small companies may at
times yield greater returns on investment than stocks of larger, more
established companies as a result of inefficiencies in the marketplace. Small
capitalization companies are generally not as well-known to investors and have
less of an investor following than larger companies.
However, the positions of small capitalization companies in the market
may be more tenuous because they typically are subject to a greater degree of
change in earnings and business prospects than larger, more established
companies. In addition, securities of small capitalization companies are traded
in lower volume than those of larger companies and may be more volatile. As a
result, the Funds may be subject to greater price volatility than a fund
consisting of large capitalization stocks. By maintaining a broadly diversified
portfolio, the sub-adviser will attempt to reduce this volatility.
-3-
<PAGE>
ARMADA EQUITY GROWTH FUND
Under normal conditions, at least 80% of the Fund's total assets
will be invested in a diversified portfolio of common stocks and securities
convertible into common stocks with large stock market capitalizations. The
Fund's Adviser selects common stocks based on a number of factors, including
historical and projected earnings growth, earnings quality and liquidity,
each in relation to the market price of the stock. Stocks purchased for the
Fund generally will be listed on a national securities exchange or will be
unlisted securities with an established over-the-counter market.
ARMADA TAX MANAGED EQUITY FUND
The Fund invests primarily in common stocks. The Fund will use several
methods to reduce the impact of federal and state income taxes on investment
income and realized capital gains distributed by the Fund.
The Fund will seek to distribute relatively low levels of taxable
investment income by investing in stocks with low dividend yields.
The Fund will endeavor to hold taxes on realized capital gains to a
minimum by investing primarily in the securities of companies with above average
earnings predictability and stability which the Fund expects to hold for several
years. The Fund will generally seek to avoid realizing short-term capital gains,
and expects to have a relatively low overall portfolio turnover rate. When the
Fund sells appreciated securities, it will attempt to select the share lots with
the highest cost basis in order to hold realized capital gains to a minimum. The
Fund may, when consistent with its overall investment approach, sell depreciated
securities to offset realized capital gains.
Although the Fund expects to use some or all of the foregoing methods
in seeking to reduce the impact of federal and state income taxes on the Fund's
dividends and distributions, portfolio management decisions will also be based
on non-tax considerations when appropriate. Certain equity and other securities
held by the Fund will produce ordinary taxable income on a regular basis. The
Fund may also sell a particular security, even though it may realize a
short-term capital gain, if the value of that security is believed to have
reached its peak or is expected to decline before the Fund would have held it
for the long-term holding period. The Fund may also be required to sell
securities in order to generate cash to pay expenses or satisfy shareholder
redemptions.
Accordingly, while the Fund seeks to minimize the effect of taxes on
its dividends and distributions, the Fund is not a tax-exempt fund, and may be
expected to distribute taxable income and realize capital gains from time to
time.
Under normal conditions, at least 80% of the Fund's total assets will
be invested in common stocks and other equity securities. The Fund's Adviser
selects common stocks based on a number of factors, including historical and
projected long-term earnings growth, earnings quality and liquidity, each in
relation to the market price of the stock. Stocks purchased for the
-4-
<PAGE>
Fund generally will be listed on a national securities exchange or will be
unlisted securities with an established over-the-counter market. The Fund may
invest up to 5% of its net assets in each of the following types of equity
securities: preferred stocks; securities convertible into common stocks; rights;
and warrants.
The Fund's long-term investment horizon is reflected in its low
portfolio turnover investment approach. The portfolio turnover rate reflects the
frequency with which securities are purchased and sold within the Fund's
portfolio. The Fund's annual portfolio turnover is not expected to exceed 25%
under normal market conditions. (A rate of turnover of 100% could occur, for
example, if all the securities held by the Fund are replaced within a period of
one year.) When a Fund sells securities realizing gains, tax laws require that
such gains be distributed to investors every year. As a result, such investors
are taxed on their pro-rata shares of the gains. By attempting to minimize
portfolio turnover, the Fund will generally have a low turnover rate. It is
impossible to predict the impact of such a strategy on the realization of gains
or losses for the Fund. For example, the Fund may forego the opportunity to
realize gains or reduce losses as a result of this policy.
The Fund may be appropriate for investors who seek capital
appreciation and whose tax status under federal and state regulations increase
the importance of such strategies.
ARMADA CORE EQUITY FUND
The Fund seeks to achieve its objective by investing in a diversified
portfolio of common stocks of issuers with large capitalizations. The Fund
normally invests in three types of equity securities: (i) growth securities,
defined as common stocks having a five-year annual earnings-per-share growth
rate of 10% or more, with no decline in the annual earnings-per-share rate
during the last five years; (ii) securities with low price-to-earnings ratios
(I.E., at least 20% below the average of the companies included in the S&P
500); and (iii) securities that pay high dividend yields (I.E., at least 20%
above such average). Under normal market conditions the Fund will invest 20%
to 50% of its total assets in each of these three types of equity securities.
The Fund is fully invested at all times.
The S&P 500 is an index composed of approximately 500 common stocks,
most of which are listed on the New York Stock Exchange (the "NYSE"). The
Sub-adviser believes that the S&P 500 is an appropriate benchmark for the Fund
because it is diversified, familiar to many investors and widely accepted as a
reference for common stock investments.
Standard & Poor's Ratings Group is not a sponsor of, or in any way
affiliated with, the Fund.
ARMADA EQUITY INDEX FUND
The S&P 500 is composed of approximately 500 common stocks, most of
which are listed on the NYSE. S&P selects the stocks for the S&P 500 on a
statistical basis. As of
-5-
<PAGE>
May 31, 1999, the stocks in the S&P 500 had an average market capitalization of
____________ and the total market capitalization of all U.S. common stocks was
_______trillion. "Market capitalization" of a company is the market price per
share of stock multiplied by the number of shares outstanding. The Adviser
believes that the S&P 500 is an appropriate benchmark for the Fund because it is
diversified, familiar to many investors and widely accepted as a reference for
common stock investments.
Under normal circumstances, the Fund will invest substantially all of
its total assets in the stocks that comprise the S&P 500 in approximately the
same percentages as the stocks represent in the index. The Fund may also acquire
derivative instruments designed to replicate the performance of the S&P 500,
such as S&P 500 stock index futures contracts or Standard & Poor's Depository
Receipts. The Fund may invest in all the approximately 500 stocks comprising the
S&P 500, or it may use a statistical sampling technique by selecting
approximately 90% of the stocks listed in the index. The Fund will only purchase
a security that is included in the S&P 500 at the time of such purchase. The
Fund, may, however, temporarily continue to hold a security that has been
deleted from the S&P 500 pending the rebalancing of the Fund's portfolio. The
Fund is not required to buy or sell securities solely because the percentage of
its assets invested in index stocks changes when the market value of its
holdings increases or decreases. In addition, the Fund may omit or remove an
index stock from its portfolio if the Adviser believes the stock to be
insufficiently liquid or believes the merit of the investment has been
substantially impaired by extraordinary events or financial conditions. With
respect to the remaining portion of its net assets, the Fund may hold temporary
cash balances which may be invested in U.S. government obligations and money
market investments. In extraordinary circumstances, the Fund may exclude a stock
listed on the index from its holdings or include a similar stock in its place if
it believes that doing so will help achieve its investment objective. The Fund
also may enter into repurchase agreements, reverse repurchase agreements, and
lend its portfolio securities.
While there can be no guarantee that the Fund's investment
results will precisely match the results of the S&P 500, the Adviser believes
that, before deduction of operating expenses, there will be a very high
correlation between the returns generated by the Fund and the S&P 500. The Fund
will attempt to achieve a correlation between the performance of its asset
portfolio and that of the S&P 500 of at least 95% before deduction of operating
expenses. A correlation of 100% would indicate perfect correlation, which would
be achieved when the Fund's net asset value, including the value of its dividend
and capital gains distributions, increases or decreases in exact proportion to
changes in the index. The Fund's ability to correlate its performance with the
S&P 500, however, may be affected by, among other things, changes in securities
markets, the manner in which S&P calculates its index, and the timing of
purchases and redemptions. The Adviser monitors the correlation of the
performance of the Fund in relation to the index under the supervision of the
Board of Trustees. The Fund intends to actively rebalance its portfolio to
achieve high correlation of performance with the S&P 500. To reduce transaction
costs and minimize shareholders' current capital gains liability, the Fund's
investment portfolio will not be automatically rebalanced to reflect changes in
the S&P 500. In the unlikely event that a high correlation is not achieved, the
Board of Trustees will take appropriate steps based on the reasons for the lower
than expected correlation.
-6-
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THE INDEXING APPROACH
The Fund is not managed in a traditional sense, that is, by making
discretionary judgments based on analysis of economic, financial and market
conditions. Under ordinary circumstances, stocks will only be eliminated from or
added to the Fund to reflect additions to or deletions from the S&P 500
(including mergers or changes in the composition of the index), to raise cash to
meet withdrawals, or to invest cash contributions. Accordingly, sales may result
in losses that may not have been realized if the Fund were actively managed and
purchases may be made that would not have been made if the Fund were actively
managed. Adverse events, such as reported losses, dividend cuts or omissions,
legal proceedings and defaults will not normally result in the sale of a common
stock. The Fund will remain substantially fully invested in common stocks and
equity derivative instruments whether stock prices are rising or falling.
The Adviser believes that the indexing approach should involve less
portfolio turnover, notwithstanding periodic additions to and deletions from the
S&P 500, and thus lower brokerage costs, transfer taxes and operating expenses,
than in more traditionally managed funds, although there is no assurance that
this will be the case. The costs and other expenses incurred in securities
transactions, apart from any difference between the investment results of the
Fund and those of the S&P 500, may cause the return of the Fund to be lower than
the return of the index.
The inclusion of a security in the S&P 500 in no way implies an
opinion by S&P as to its attractiveness as an investment. S&P is not a sponsor
of, or in any way affiliated with, the Fund.
The common stock of National City Corporation, the parent company of
the Adviser, is included in the S&P 500. Like the other stocks in the S&P 500,
the Fund will invest in the common stock of National City Corporation in
approximately the same proportion as the percentage National City Corporation
common stock represents in the S&P 500. As of May 31, 1999, National City
Corporation common stock represented 0. __% of the index.
ARMADA EQUITY INCOME FUND
Under normal conditions, at least 80% of the value of the Fund's total
assets will be invested in income-producing common stocks and securities
convertible into common stocks assigned a rating of Ba/BB or higher by Moody's,
S&P, Fitch or Duff. The Fund's Adviser will generally attempt to select
securities that provide a higher yield than that of the general market and will
generally dispose of securities whose yields approach a market yield or that
otherwise fail to satisfy investment criteria.
ARMADA BALANCED ALLOCATION FUND
The Fund may invest in any type or class of security. Under normal
market conditions the Fund invests in common stocks, fixed income securities,
securities convertible into common stocks (i.e., warrants, convertible preferred
stock, fixed rate preferred stock,
-7-
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convertible fixed income securities, options and rights) and cash equivalent
securities. The Fund intends to invest 45% to 65% of its net assets in common
stocks and securities convertible into common stocks, 25% to 55% of its net
assets in fixed income securities and up to 30% of its net assets in cash and
cash equivalents. Of these investments, no more than 20% of the Fund's total
assets will be invested in foreign securities.
The Fund holds common stocks primarily for the purpose of providing
long-term growth of capital. When selecting stocks for the Fund, the Adviser
will consider primarily their potential for long-term capital appreciation. The
Fund intends to invest predominantly in those companies which are
growth-oriented and have exhibited consistent, above-average growth in revenues
and earnings. The Fund will invest in the common and preferred stocks of
companies with a market capitalization of at least $100 million and which are
traded either in established over-the-counter markets or on national exchanges.
The Fund invests the fixed income portion of its portfolio of
investments in a broad range of investment grade debt securities which are
rated at the time of purchase within the four highest rating categories
assigned by Moody's, S&P, Fitch, or Duff (defined under "Ratings Criteria"
below). These fixed income securities will consist of bonds, debentures,
notes, zero coupon securities, asset-backed securities, state, municipal and
industrial revenue bonds, obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, certificates of deposit,
time deposits, high quality commercial paper, bankers' acceptances and
variable amount master demand notes. In addition, a portion of the Fund's
assets may be invested from time to time in first mortgage loans and
participation certificates in pools of mortgages issued or guaranteed by the
U.S. government or its agencies or instrumentalities. Some fixed income
securities may have warrants or options attached.
ARMADA TOTAL RETURN ADVANTAGE FUND
The Fund will normally invest at least 80% of the value of its total
assets in debt securities of all types, although up to 20% of the value of its
total assets may be invested in preferred stocks and other investments. Under
normal market conditions, the Fund maintains an average dollar-weighted
portfolio maturity of four to twelve years.
Although the Total Return Advantage Fund normally invests
substantially all of its assets in investment grade debt securities, it may
invest up to 15% of its net assets in non-rated securities and securities rated
below investment grade (commonly referred to as "junk bonds"). For a discussion
of risk factors relating to such securities, see "Risks Related to Lower Rated
Securities Which May Be Purchased by the Total Return Advantage Fund." See
"Additional Information about Portfolio Instruments -- Risks Related to Lower
Rated Securities Which May Be Purchased by the Total Return Advantage Fund."
ARMADA BOND FUND
The Fund seeks to achieve this objective by investing at least 80% of
its total assets in investment grade fixed-income securities. The Fund uses the
Lehman Aggregate Bond Index ("Lehman Aggregate") as its performance benchmark.
The average maturity of the Fund will be from four to twelve years.
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ARMADA INTERMEDIATE BOND FUND
The Fund normally invests at least 80% of the value of its total
assets in debt securities of all types, although up to 20% of the value of its
total assets may be invested in preferred stocks and other investments. Under
normal market conditions, the Fund maintains an average dollar-weighted
portfolio maturity of two to ten years. The Fund uses the Lehman Intermediate
Government/Corporate Bond Index as its performance benchmark.
ARMADA GNMA FUND
The Fund seeks to achieve this objective by investing primarily (at
least 80% of its total assets under normal conditions) in mortgage pass-through
securities guaranteed by the Government National Mortgage Association (GNMA).
Any remaining assets may consist of other investment grade fixed income
securities. GNMA was established as an instrumentality of the U.S. government to
supervise and finance certain types of activities. Under normal market
conditions, the estimated average life of the GNMA Fund's holdings of mortgage
pass-through and mortgage-backed securities will range between 2 and 10 years.
The Fund employs the Lehman GNMA Index as its performance benchmark.
ARMADA ENHANCED INCOME FUND
The Fund will normally invest at least 80% of the value of its total
assets in investment grade debt securities of all types. However, up to 20% of
the value of its total assets may be invested in preferred stocks and other
investments. In making investment decisions, the Fund's adviser will focus on a
number of factors, including yield to maturity, maturity, quality and the
outlook for specific issuers and market sectors. Under normal market conditions,
the Fund intends to maintain an average dollar-weighted portfolio maturity for
its debt securities of from 1 to 5 years. The two components of total rate of
return are current income and change in the value of portfolio securities. The
Merrill Lynch 1-3 Year Treasury Index is composed of Treasury Securities that
mature in one to three years. The average dollar-weighted maturity of the Index
is generally from 2-1/2 to 3 years. The Index is unmanaged, and its total rate
of return does not reflect the expenses that a mutual fund normally incurs. The
Fund's objective refers to a return after deduction of Fund expenses.
ARMADA OHIO TAX EXEMPT BOND FUND
The Fund seeks to achieve its objective by investing substantially all
of its assets in a portfolio 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
interest on which, in the opinion of counsel issued on the date of the issuance
thereof, is exempt from regular federal income tax (Municipal Securities).
Under normal market conditions, at least 80% of the value of the
Fund's total assets will be invested in Municipal Securities. This policy is
fundamental and may not be changed
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without the affirmative vote of the holders of a majority of the Fund's
outstanding shares (as defined under "Shareholder Vote" below). In addition,
under normal market conditions, at least 80% of the value of the Fund's total
assets will be invested in Municipal Securities issued by or on behalf of the
State of Ohio, political subdivisions thereof, or agencies or
instrumentalities of the State or its political subdivisions (Ohio Municipal
Securities). 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. See "Additional Tax Information Concerning the Ohio Tax Exempt
Bond Fund."
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
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,
obligations of the United States, including territories and possessions of the
United States, the income from which is, in the opinion of counsel, exempt from
regular federal income tax and Pennsylvania state income tax imposed upon
non-corporate taxpayers, and securities of money market investment companies
that invest primarily in such securities (Pennsylvania Municipal Securities).
Under normal market conditions, the Fund will be fully invested in
Pennsylvania 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 "Shareholder Vote"). Dividends
paid by the Fund which are derived from interest properly attributable to
Pennsylvania Municipal Securities will be exempt from regular federal income
tax and Pennsylvania 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 Pennsylvania personal income
tax. See "Additional Tax Information concerning the Pennsylvania Municipal
Bond Fund."
ARMADA NATIONAL TAX EXEMPT FUND
Under normal market conditions, at least 80% of the value of the
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
"Shareholder Vote").
ARMADA OHIO TAX EXEMPT BOND, PENNSYLVANIA MUNICIPAL BOND AND NATIONAL
TAX EXEMPT BOND FUNDS
Although each Fund's average weighted maturity will vary in light
of current market and economic conditions, the comparative yields on
instruments with different maturities, and other factors, the Ohio Tax Exempt
Bond and Pennsylvania Municipal Bond and National Tax Exempt Bond Funds
anticipate that they will maintain a dollar-weighted average portfolio
maturity of two to ten years.
For temporary defensive or liquidity purposes when, in the opinion of
the Funds' adviser, Ohio Municipal Securities or Pennsylvania Municipal
Securities of sufficient quality, as the
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case may be, are not readily available, the Ohio Tax Exempt Bond and
Pennsylvania Municipal Bond Funds may invest up to 100% of their assets in
other Municipal Securities and in taxable securities.
All Funds may hold up to 100% of their assets in uninvested cash
reserves, pending investment, during temporary defensive periods; however,
uninvested cash reserves will not earn income.
Each Fund may invest in other investments as described below under
"Other Investment Policies" including stand-by commitments, variable and
floating rate obligations, certificates of participation, other investment
companies, illiquid securities, Taxable Money Market Instruments (as defined
below), zero coupon obligations and repurchase agreements and engage in
when-issued transactions.
SPECIAL RISK CONSIDERATIONS
ARMADA OHIO TAX EXEMPT BOND, PENNSYLVANIA MUNICIPAL BOND, NATIONAL TAX
EXEMPT BOND FUNDS
The Ohio Tax Exempt and Pennsylvania Tax Exempt Bond Funds are
classified as non-diversified under the 1940 Act. Investment return on a
non-diversified portfolio typically is dependent upon the performance of a
smaller number of securities relative to the number held in a diversified
portfolio. Consequently, the change in value of any one security may affect the
overall value of a non-diversified portfolio more than it would a diversified
portfolio, and thereby subject the market-based net asset value per share of the
non-diversified portfolio to greater fluctuations. In addition, a
non-diversified portfolio may be more susceptible to economic, political and
regulatory developments than a diversified investment portfolio with similar
objectives may be.
Although (i) all of the 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, (ii) the Ohio Tax Exempt Bond and
National Tax Exempt Bond Funds may invest up to 20% of their respective total
assets in private activity bonds (described below) and taxable investments,
(iii) the Pennsylvania Municipal Bond Fund may invest up to 100% of its total
assets in Pennsylvania private activity bonds and (iv) the National Tax
Exempt Fund Bond may invest 25% or more of its net assets in Municipal
Securities whose issues are in the same state, the Funds do not presently
intend to do so unless, in the opinion of the adviser, the investment is
warranted. To the extent that a Fund's assets are invested in such
investments, the Fund will be subject to the peculiar risks presented by the
laws and economic conditions relating to such projects and private activity
bonds to a greater extent than it would be if its assets were not so invested.
See "Municipal Securities"," "Special Considerations Regarding
Investment in Ohio Municipal Securities," and "Special Considerations Regarding
Investment in Pennsylvania Municipal Securities" below.
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ARMADA OHIO MUNICIPAL MONEY MARKET FUND
The Fund seeks to achieve its objective by investing substantially
all of its assets in Municipal Securities (defined below) issued by or on
behalf of the State of Ohio, political subdivisions thereof or agencies or
instrumentalities of the State or its political subdivisions (Ohio Municipal
Securities).
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
"Shareholder Vote"). 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.
See "Special Risk Considerations of the- Ohio Municipal Money Market
Fund" below.
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ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
The Fund seeks to achieve its objective by investing substantially
all of its assets in Municipal Securities defined below 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 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.
See "Special Risk Considerations of the Pennsylvania Tax Exempt Money
Market Fund" below.
ARMADA TAX EXEMPT MONEY MARKET FUND
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.
See "Special Risk Considerations of the Tax Exempt Money Market
Fund" below.
SPECIAL RISK CONSIDERATIONS -- OHIO MUNICIPAL MONEY MARKET, PENNSYLVANIA
TAX EXEMPT MONEY MARKET AND THE TAX EXEMPT 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 Ohio Municipal Money Market, Pennsylvania Tax Exempt Money Market and
Tax Exempt 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. The Ohio
Municipal Money Market Fund may invest up to 100% of its assets in private
activity bonds. In addition, although the Pennsylvania Tax Exempt Money
Market and 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. 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.
ARMADA MONEY MARKET FUND
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
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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.
ARMADA GOVERNMENT MONEY MARKET FUND
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 S&P.
ARMADA TREASURY MONEY MARKET FUND
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 S&P.
ARMADA MID CAP GROWTH FUND
Under normal market conditions, the Fund will invest at least 80% of
the value of its total assets in common stocks and securities convertible into
common stocks of companies believed by the Adviser to be characterized by sound
management and the ability to finance expected long-term growth. Under normal
market conditions, the Fund will invest at least 80% of the value of its total
assets in common stocks and securities convertible into common stocks of
companies with market capitalizations comparable to companies in the Russell Mid
Cap Growth Index. The Fund may also invest up to 20% of the value of its total
assets in preferred stocks, corporate bonds, notes, units of real estate
investment trusts, warrants, and short-term obligations (with maturities of 12
months or less) consisting of commercial paper (including variable amount master
demand notes), bankers' acceptances, certificates of deposit, repurchase
agreements, obligations issued or guaranteed by the U.S. government or, its
agencies or instrumentalities, and demand and time deposits of domestic and
foreign banks and savings and loan associations. The Fund may also hold
securities of other investment companies and depository or custodial receipts
representing beneficial interests in any of the foregoing securities.
Subject to the foregoing policies, the Fund may also invest up to 25%
of its net assets in foreign securities either directly or through the purchase
of American Depository Receipts ("ADRs"), European Depository Receipts ("EDRs"),
Global Depository Receipts ("GDRs") and other similar global instruments, and
may also invest in securities issued by foreign branches of U.S. banks and
foreign banks, Canadian commercial paper and in U.S. dollar-denominated
commercial paper of a foreign issuer.
The Fund anticipates investing in growth-oriented, medium-sized
companies. Medium-sized companies are considered to be those with a market
capitalization comparable to companies in the Russell Mid Cap Growth Index.
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<PAGE>
Investments will be in companies that have typically exhibited consistent,
above-average growth in revenues and earnings, strong management, and sound
and improving financial fundamentals. Often, these companies are market or
industry leaders, have excellent products and/or services, and exhibit the
potential for growth. Primary holdings of the Fund are in companies that
participate in long-term growth industries, although these will be
supplemented by holdings in non-growth industries that exhibit the desired
characteristics.
Consistent with the foregoing, the Fund will focus its investments in
those companies and types of companies that the Adviser believes will enable the
Fund to achieve its investment objective.
ARMADA LARGE CAP ULTRA FUND
Under normal market conditions, the Large Cap Ultra Fund will invest
at least 80% of the value of its total assets in common stocks and securities
convertible into common stocks of companies believed by the Investment Adviser
to be characterized by sound management and the ability to finance expected
long-term growth and with market capitalizations comparable to companies in the
Standard & Poor's Barra Growth Index. The Large Cap Ultra Fund may also invest
up to 20% of the value of its total assets in preferred stocks, corporate bonds,
notes, units of real estate investment trusts, warrants, and short-term
obligations (with maturities of 12 months or less) consisting of commercial
paper (including variable amount master demand notes), bankers' acceptances,
certificates of deposit, repurchase agreements, obligations issued or guaranteed
by the U.S. Government or its agencies or instrumentalities, and demand and time
deposits of domestic and foreign banks and savings and loan associations. The
Large Cap Ultra Fund may also hold securities of other investment companies and
depository or custodial receipts representing beneficial interests in any of the
foregoing securities.
Subject to the foregoing policies, the Large Cap Ultra Fund may also
invest up to 25% of its net assets in foreign securities either directly or
through the purchase of American depository receipts ("ADRs") or European
depository receipts ("EDRs") and may also invest in securities issued by foreign
branches of U.S. banks and foreign banks, CCP, and in U.S. dollar-denominated
commercial paper of a foreign issuer.
The Large Cap Ultra Fund anticipates investing in growth-oriented
companies with large market capitalization, defined as capitalization
comparable to companies in the Standard & Poor's Barra Growth Index. The
Large Cap Ultra Fund will invest in companies that have typically exhibited
consistent, above-average growth in revenues and earnings, strong management,
and sound and improving financial fundamentals. Often, these companies are
market or industry leaders, have excellent products and/or services, and
exhibit the potential for growth. Core holdings of the Large Cap Ultra Fund
are in companies that participate in long-term growth industries, although
these will be supplemented by holdings in non-growth industries that exhibit
the desired characteristics.
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Consistent with the foregoing, the Large Cap Ultra Fund will focus its
investments in those companies and types of companies that the Investment
Adviser believes will enable such Fund to achieve its investment objective.
ARMADA U.S. GOVERNMENT INCOME FUND
Under normal market conditions, the Fund will invest at least 65% of
its total assets in obligations issued or guaranteed by the U.S. government or
its agencies or instrumentalities, although up to 35% of the value of its total
assets may be invested in debt securities and preferred stocks of
non-governmental issuers. Consistent with the foregoing, under current market
conditions, the Fund intends to invest up to 80% of the value of its total
assets in mortgage-related securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities. The Fund also may invest up to
35% of its total assets in mortgage-related securities issued by
non-Governmental entities and in other securities described below. The Fund
anticipates that it will acquire securities with average remaining maturities of
2 to 10 years.
The types of U.S. government obligations, including mortgage-related
securities, invested in by the Fund will include obligations issued or
guaranteed as to payment of principal and interest by the full faith and credit
of the U.S. Treasury, such as Treasury bills, notes and bonds, Stripped Treasury
Obligations and government securities.
The Fund may also hold short-term obligations (with maturities of 12
months or less) consisting of domestic and foreign commercial paper (including
variable amount master demand notes), rated at the time of purchase within the
top two rating categories assigned by a Rating Agency or, if unrated, which the
Adviser deems present attractive opportunities and are of comparable quality,
bankers' acceptances, certificates of deposit and time deposits of domestic and
foreign branches of U.S. banks and foreign banks, and repurchase and reverse
repurchase agreements. The Fund may also invest in corporate debt securities
which are rated at the time of purchase within the top four rating categories
assigned by a Rating Agency or, if unrated, which the Adviser deems present
attractive opportunities and are of comparable quality.
ARMADA MICHIGAN MUNICIPAL BOND FUND
Under normal market conditions and as a fundamental policy, at least
80% of the net assets of the Michigan Municipal Bond Fund will be invested in a
portfolio of securities exempt from Michigan State taxes. The Fund may invest up
to 20% of its assets in private activity bonds which may be treated as a special
tax preference item under the federal alternative minimum tax.
"Michigan Municipal Securities" include debt obligations, consisting
of notes, bonds and commercial paper, issued by or on behalf of the State of
Michigan, its political subdivisions, municipalities and public authorities, the
interest on which is, in the opinion of bond counsel to the issuer, exempt from
federal income tax and Michigan state income taxes (but may be treated as a
preference item for individuals for purposes of the federal alternative minimum
tax) and debt obligations issued by the government of Puerto Rico, the U.S.
territories
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<PAGE>
and possessions of Guam, the U.S. Virgin Islands or such other governmental
entities whose debt obligations, either by law or treaty, generate interest
income which is exempt from federal and Michigan state income taxes.
Under normal market conditions, at least 65% of the net assets of the
Fund will be invested in Michigan Municipal Securities consisting of bonds and
notes with remaining maturities at the time of purchase of one year or more.
Quality is the primary consideration in selecting Michigan Municipal Securities
for investment by the Fund.
The Fund intends that, under normal market conditions, it will be
invested in long-term Michigan Municipal Securities and that the average
weighted maturity of such investments will be 2 to 10 years, although the Fund
may invest in Michigan Municipal Securities of any maturity and the Adviser may
extend or shorten the average weighted maturity of its portfolio depending upon
anticipated changes in interest rates or other relevant market factors. In
addition, the average weighted rating of the Fund's portfolio may vary depending
upon the availability of suitable Michigan Municipal Securities or other
relevant market factors.
The Fund invests in Michigan Municipal Securities which are rated at
the time of purchase within the four highest rating categories assigned by a
Rating Agency or, in the case of notes, tax-exempt commercial paper or variable
rate demand obligations, rated within the two highest rating categories assigned
by a Rating Agency. The Fund may also purchase Michigan Municipal Securities
which are unrated at the time of purchase but are determined to be of comparable
quality by the Adviser pursuant to guidelines approved by the Trust's Board of
Trustees. The applicable Michigan Municipal Securities ratings are described in
Appendix A.
Interest income from certain types of municipal securities may be
subject to federal alternative minimum tax. The Fund will not treat these bonds
as "Michigan Municipal Securities" for purposes of measuring compliance with the
80% and 65% tests described above. To the extent the Fund invests in these
bonds, individual shareholders, depending on their own tax status, may be
subject to alternative minimum tax on that part of the Fund's distributions
derived from these bonds.
The Fund may invest in taxable obligations if, for example, suitable
tax-exempt obligations are unavailable or if acquisition of U.S. government or
other taxable securities is deemed appropriate for temporary defensive purposes
as determined by the Adviser to be warranted due to market conditions. Such
taxable obligations consist of government securities, certificates of deposit,
time deposits and bankers' acceptances of selected banks, commercial paper
meeting the Fund's quality standards for tax-exempt commercial paper (as
described above), and such taxable obligations as may be subject to repurchase
agreements. These obligations are described further in the Statement of
Additional Information. Under such circumstances and during the period of such
investment, the Fund may not achieve its stated investment objective.
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Because the Fund invests primarily in securities issued by the State
of Michigan and its political subdivisions, municipalities and public
authorities, the Fund's performance is closely tied to the general economic
conditions within the State as a whole and to the economic conditions within
particular industries and geographic areas represented or located within the
State. However, the Fund attempts to diversify, to the extent the Adviser deems
appropriate, among issuers and geographic areas in the State of Michigan.
The Fund is classified as a "non-diversified" investment company,
which means that the amount of assets of the Fund that may be invested in the
securities of a single issuer is not limited by the 1940 Act. Nevertheless, the
Fund intends to conduct its operations so as to qualify as a "regulated
investment company" for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"). The Code requires that, at the end of each quarter of a
fund's taxable year, (i) at least 50% of the market value of its total assets be
invested in cash, U.S. government securities, securities of other regulated
investment companies and other securities, with such other securities of any one
issuer limited for the purposes of this calculation to an amount not greater
than 5% of the value of the fund's total assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
total assets be invested in the securities of any one issuer (other than U.S.
government securities or the securities of other regulated investment
companies). Since a relatively high percentage of the Fund's assets may be
invested in the obligations of a limited number of issuers, some of which may be
within the same economic sector, the Fund's portfolio securities may be more
susceptible to any single economic, political or regulatory occurrence than the
portfolio securities of a diversified investment company.
See "Special Considerations Regarding Investment in Michigan
Municipal Securities" below.
ARMADA TREASURY PLUS MONEY MARKET FUND
The 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
securities as determined by the Adviser. A description of ratings is also
contained in the Statement of Additional Information.
The 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 the Fund's
dollar-weighted average portfolio maturity may not exceed 90 days.
RATINGS CRITERIA
The Balanced Allocation and Michigan Tax Exempt Bonds Fund may
invest in investment grade debt securities which are rated at the time of
purchase within the four highest ratings groups assigned by Moody's (Aaa, Aa,
A and Baa), S&P (AAA, AA, A and BBB), Fitch (AAA, AA, A and BBB) or Duff
(AAA, AA, A and BBB), or, if unrated, which are determined by the Adviser to
be of comparable quality pursuant to guidelines approved by the Trust's Board
of Trustees. Debt securities rated in the lowest investment grade debt
category (Baa by Moody's or BBB by S&P, Fitch or Duff) have speculative
characteristics; changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade securities.
In the event that, subsequent to its purchase by a Fund, a rated
security ceases to be rated or its rating is reduced below investment grade, the
Adviser will consider whether the Fund should continue to hold the security. The
Adviser expects, however, to sell promptly any securities that are
non-investment grade as a result of such events that exceed 5% of a Fund's net
assets where the Adviser has determined that such sale is in the best interest
of the particular Fund.
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SHAREHOLDER VOTE
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 shows 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.
ADDITIONAL INFORMATION ABOUT PORTFOLIO INSTRUMENTS
ELIGIBLE SECURITIES
The Money Market 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 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 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
Each Fund (other than the Equity Index, Treasury Money Market and
Treasury Plus Money Market Funds) may purchase variable and floating rate
obligations (including variable amount master demand notes) which are unsecured
instruments that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rate. Because variable and floating rate
obligations are direct lending arrangements between the Fund and the issuer,
they are
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not normally traded although certain variable and floating rate obligations,
such as Student Loan Marketing Association variable rate obligations, may have a
more active secondary market because they are issued or guaranteed by the U.S.
Government or its agencies or instrumentalities. Even though there may be no
active secondary market in such instruments, 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. 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.
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.
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GUARANTEED INVESTMENT CONTRACTS
The International Equity, Small Cap Value, Small Cap Growth, Equity
Growth, Tax Managed Equity, Core Equity, Equity Income, Balanced Allocation,
Total Return Advantage, Intermediate Bond and Enhanced Income Funds and the
Money Market Funds may make limited investments in "GICs" issued by U.S.
insurance companies. When investing in guaranteed investment contracts GICs,
a Fund makes cash contributions to a deposit fund or an insurance company's
general account. The insurance company then credits to that Fund monthly a
guaranteed minimum 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. A Fund will purchase a GIC only when its Adviser
or Sub-Adviser has determined, under guidelines established by the Board of
Trustees, that the GIC presents minimal credit risks to the Fund and is of
comparable quality to instruments that are rated high quality by one or more
rating agencies. For the Money Market Fund, the Fund's investments in GICs
will not exceed 10% of the Fund's net assets. In addition, because each 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 15%, 10% in the case of the Money Market Fund 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 Ohio Municipal Money Market, Pennsylvania Tax Exempt Money Market,
Money Market, Mid Cap Growth and Michigan Municipal Bond 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 Ohio Municipal, Pennsylvania Tax Exempt Fund, Mid
Cap Growth and Michigan Tax Exempt Bond Funds in commercial paper and other
short term promissory notes issued by corporations, municipalities and other
entities (including variable and
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floating rate instruments) must be rated at the time of purchase "A-2" or
better by S&P, "Prime-2" or better by Moody's, "F-2" or better by Fitch,
"Duff 2" or better by Duff, or if not rated, 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 Mid
Cap Growth Fund may invest in Canadian commercial paper, which is U.S. dollar
denominated commercial paper issued by a Canadian corporation or a Canadian
counterpart of a U.S. corporation.
REPURCHASE AGREEMENTS
Securities held by the International Equity, Small Cap Growth, Tax
Managed Equity, Core Equity, Equity Index, Balanced Allocation, Total Return
Advantage, Bond, Intermediate Bond, GNMA, Enhanced Income, Ohio Municipal Money
Market, Pennsylvania Tax-Exempt Money Market, Money Market, Government Money
Market, Mid Cap Growth, U.S. Government Income and Michigan Tax Exempt Bond
Funds may be subject to repurchase agreements. Under the terms of a repurchase
agreement, a Fund purchases securities from financial institutions such as banks
and broker-dealers which the Fund's Adviser or Sub Adviser deems creditworthy
under guidelines approved by the Board of Trustees, subject to the seller's
agreement to repurchase such securities at a mutually agreed-upon date and
price. The repurchase price generally equals the price paid by the Fund plus
interest negotiated on the basis of current short term rates, which may be more
or less than the rate on the underlying portfolio securities.
The seller under a repurchase agreement will be required to maintain
the value of collateral held pursuant to the agreement at not less than the
repurchase price (including accrued interest). If the seller were to default on
its repurchase obligation or become insolvent, the Fund holding such obligation
would suffer a loss to the extent that the proceeds from a sale of the
underlying portfolio securities were less than the repurchase price under the
agreement, or to the extent that the disposition of such securities by the Fund
were 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.
With respect to the Ohio Municipal Money Market, Pennsylvania Tax
Exempt Money Market, Tax Exempt Money Market, Money Market and Government Money
Market Funds, 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.
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REVERSE REPURCHASE AGREEMENTS
The International Equity, Small Cap Value, Small Cap Growth, Equity
Growth, Tax Managed Equity, Core Equity, Equity Index, Equity Income,
Balanced Allocation, Total Return Advantage, the Fixed Income Funds, Ohio
Municipal Money Market, Pennsylvania Tax Exempt Money Market, Money Market,
Government Money Market, Mid Cap Growth Funds may enter into reverse
repurchase agreements in accordance with its investment restrictions.
Pursuant to such agreements, a Fund would sell portfolio securities to
financial institutions such as banks and broker-dealers, and agree to
repurchase them at a mutually agreed-upon date and price. A Fund intends to
enter into reverse repurchase agreements only to avoid otherwise selling
securities during unfavorable market conditions to meet redemptions. At the
time a Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account assets such as U.S. Government securities or
other liquid, high grade debt securities consistent with the Fund's
investment restrictions having a value at least equal to the repurchase price
(including accrued interest), and will subsequently monitor the account to
ensure that such equivalent value is maintained. Whenever the Ohio Municipal
Money Market, Pennsylvania Tax-Exempt Money Market, Money Market and
Government Money Market Funds enter 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 a Fund may
decline below the price at which it is obligated to repurchase the
securities. Reverse repurchase agreements are considered to be borrowings by
the Fund under the 1940 Act.
LENDING OF PORTFOLIO SECURITIES
The International Equity, Small Cap Value, Small Cap Growth, Equity
Growth, Tax Managed Equity, Core Equity, Equity Index, Equity Income, Balanced
Allocation, Total Return Advantage, Bond, Intermediate Bond, GNMA, Enhanced
Income, Money Market, Government Money Market, Mid Cap Growth and U.S.
Government Income Funds may lend securities to broker-dealers, banks or other
institutional borrowers pursuant to agreements requiring that the loans be
continuously secured by cash, securities of the U.S. government or its agencies,
or any combination of cash and such securities, as collateral equal to 100% of
the market value at all times of the securities lent. Such loans will not be
made if, as a result, the aggregate amount of all outstanding securities loans
for a Fund exceed one-third of the value of its total assets taken at fair
market value. Collateral must be valued daily by the Fund's Adviser or
Sub-adviser and the borrower will be required to provide additional collateral
should the market value of the loaned securities increase. During the time
portfolio securities are on loan, the borrower pays the Fund involved any
dividends or interest paid on such securities. Loans are subject to termination
by the Fund or the borrower at any time. While 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 its Adviser or Sub-adviser has determined are creditworthy
under guidelines established by the Trust's Board of Trustees.
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A Fund will continue to receive interest on the securities lent while
simultaneously earning interest on the investment of the cash collateral in U.S.
government securities. However, a Fund will normally pay lending fees to such
broker-dealers and related expenses from the interest earned on invested
collateral. There may be risks of delay in receiving additional collateral or
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Adviser to be of good standing
and when, in the judgment of the adviser, the consideration which can be earned
currently from such securities loans justifies the attendant risk. Any loan may
be terminated by either party upon reasonable notice to the other party.
ILLIQUID SECURITIES
The International Equity, Small Cap Value, Small Cap Growth, Equity
Growth, Tax Managed Equity, Core Equity, Equity Index, Equity Income, Total
Return Advantage, Bond, Intermediate Bond, GNMA, Enhanced Income, Ohio Tax
Exempt Bond, Pennsylvania Municipal Bond, National Tax Exempt Bond, Mid Cap
Growth, U.S. Government Income and Michigan Tax Exempt Bond Funds will not
invest more than 15% of their respective net assets in securities that are
illiquid. The Money Market Funds will not knowingly invest more than 10% of
the value of their respective net assets in securities that are illiquid.
Illiquid securities would generally include repurchase agreements and GICs
with notice/termination dates in excess of seven days and certain securities
which are subject to trading restrictions because they are not registered
under the Securities Act of 1933, as amended (the "1933 Act").
Each Fund may purchase securities which are not registered under the
1933 Act but which can be sold to "qualified institutional buyers" in accordance
with Rule 144A under the 1933 Act. Any such security will not be considered
illiquid so long as it is determined by the Board of Trustees or the Fund's
Adviser or Sub-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.
TAXABLE MONEY MARKET INSTRUMENTS
The Ohio Tax Exempt Bond, Pennsylvania Municipal, National Tax
Exempt Bond and Michigan Municipal Bond Funds may invest, from time to time,
a portion of its assets for temporary defensive or liquidity purposes in
short-term money market instruments, the income from which is subject to
federal income tax ("Taxable Money Market Instruments"). Taxable Money Market
Instruments may include: obligations of the U.S. government and its agencies
and instrumentalities; debt securities (including commercial paper) of
issuers having, at the time of purchase, a quality rating within the highest
rating category of S&P, Fitch, Duff, or Moody's; certificates of deposit;
bankers' acceptances; and repurchase agreements with respect to such
obligations.
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FOREIGN SECURITIES AND CURRENCIES
The International Equity, Small Cap Value, Small Cap Growth, Equity
Growth, Tax Managed Equity, Core Equity, Equity Income, Balanced Allocation and
Mid Cap Growth Funds may invest up to 20% (100% in the case of the International
Equity Fund) of its total assets at the time of purchase in securities issued by
foreign entities and ADRs, EDRs and GDRs (defined below).
The Total Return Advantage, Intermediate Bond, Enhanced Income and
U.S. Government Income Funds may also invest in securities issued by foreign
issuers either directly or indirectly through investments in American, European
or Global Depository Receipts (see "American, European and Global Depository
Receipts" below). Such securities may or may not be listed on foreign or
domestic stock exchanges.
Investments in foreign securities involve certain inherent risks, such
as political or economic instability of the issuer or the country of issue, the
difficulty of predicting international trade patterns, changes in exchange rates
of foreign currencies and the possibility of adverse changes in investment or
exchange control regulations. There may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies.
Further, foreign stock markets are generally not as developed or efficient as
those in the U.S., and in most foreign markets, volume and liquidity are less
than in the U.S. Fixed commissions on foreign stock exchanges are generally
higher than the negotiated commissions on U.S. exchanges, and there is generally
less government supervision and regulation of foreign stock exchanges, brokers
and companies than in the U.S.
With respect to certain foreign countries, there is a possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets, or diplomatic developments that could affect investment within
those countries. Because of these and other factors, securities of foreign
companies acquired by the Fund may be subject to greater fluctuation in price
than securities of domestic companies.
Since the Funds will invest substantially in securities denominated in
or quoted in currencies other than the U.S. dollar, changes in currency exchange
rates (as well as changes in market values) will affect the value in U.S.
dollars of securities held by the Fund. Foreign exchange rates are influenced by
trade and investment flows, policy decisions of governments, and investor
sentiment about these and other issues. In addition, costs are incurred in
connection with conversions between various currencies.
The conversion of the eleven member states of the European Union to a
common currency, the "euro," is scheduled to occur on January 1, 1999. As a
result of the conversion, securities issued by the member states will be subject
to certain risks, including competitive implications of increased price
transparency of European Union markets (including labor markets) resulting from
adoption of a common currency and issuers' plans for pricing their own
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products and services in euro; an issuer's ability to make any required
information technology updates on a timely basis, and costs associated with the
conversion (including costs of dual currency operations through January 1,
2002); currency exchange rate risk and derivatives exposure (including the
disappearance of price sources, such as certain interest rate indices) and
continuity of material contracts and potential tax consequences. Other risks
include whether the payment and operational systems of banks and other financial
institutions will be ready by the scheduled launch date; the creation of
suitable clearing and settlement payment systems for the new currency; the legal
treatment of certain outstanding financial contracts after January 1, 1999 that
refer to existing currencies rather than the euro; the establishment and
maintenance of exchange rates for currencies being converted into the euro; the
fluctuation of the euro relative to non-euro currencies during the transition
period from January 1, 1999 to December 31, 2000 and beyond; whether the
interest rate, tax and labor regimes of participating European countries will
converge over time; and whether the conversion of the currencies of other EU
countries such as the United Kingdom, Denmark and Greece into the euro and the
possible admission of other non-EU countries such as Poland, Latvia and
Lithuania as members of the EU may have an impact on the euro.
These or other factors, including political and economic risks, could
cause market disruptions before or after the introduction of the euro, and could
adversely affect the value of securities and foreign currencies held by the
Funds. Commissions on transactions in foreign securities may be higher than
those for similar transactions on domestic stock markets. In addition, clearance
and settlement procedures may be different in foreign countries and, in certain
markets, such procedures have been unable to keep pace with the volume of
securities transactions, thus making it difficult to conduct such transactions.
The expense ratio of a Fund can be expected to be higher than that of
funds investing in domestic securities. The costs of investing abroad are
generally higher for several reasons, including the cost of investment research,
increased costs of custody for foreign securities, higher commissions paid for
comparable transactions involving foreign securities, and costs arising from
delays in settlements of transactions involving foreign securities.
Interest and dividends payable on the Fund's foreign portfolio
securities may be subject to foreign withholding taxes. To the extent such taxes
are not offset by tax credits or deductions allowed to investors under U.S.
federal income tax provisions, they may reduce the return to the Fund's
shareholders.
The Funds may invest in ADRs. Some of the Funds may also invest in
SPDRs, EDRs, GDRs and other similar global instruments. The Mid Cap Growth Fund
may also invest in MidCap SPDRs. ADRs are receipts issued in registered form by
a U.S. bank or trust company evidencing ownership of underlying securities
issued by a foreign issuer. ADRs may be listed on a national securities exchange
or may be traded in the over-the-counter markets. ADR prices are denominated in
U.S. dollars although the underlying securities may be denominated in a foreign
currency. SPDRs are receipts designed to replicate the performance of the S&P
500. MidCap SPDRs represent ownership in the MidCap SPDR Trust, a unit
investment trust which holds a portfolio of common stocks that closely tracks
the price performance and dividend yield of the S&P
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MidCap 400 Index. EDRs, which are sometimes referred to as Continental
Depository Receipts, are receipts issued in Europe typically by non-U.S. banks
or trust companies and foreign branches of U.S. banks that evidence ownership of
foreign or U.S. securities. EDRs are designed for use in European exchange and
over-the-counter markets. GDRs are receipts structured similarly to EDRs and are
marketed globally. GDRs are designed for trading in non-U.S. securities markets.
Investments in ADRs, EDRs and GDRs involve risks similar to those accompanying
direct investments in foreign securities, but those that are traded in the
over-the-counter market which do not have an active or substantial secondary
market will be considered illiquid and, therefore, will be subject to a Fund's
limitation with respect to illiquid securities.
The principal difference between sponsored and unsponsored ADR, EDR
and GDR programs is that unsponsored ones are organized independently and
without the cooperation of the issuer of the underlying securities.
Consequently, available information concerning the issuer may not be as current
as for sponsored ADRs, EDRs and GDRs, and the prices of unsponsored ADRs, EDRs
and GDRs may be more volatile.
FOREIGN GOVERNMENT OBLIGATIONS
The International Equity, Balanced Allocation, Mid Cap Growth and U.S.
Government Income Funds may purchase debt obligations issued or guaranteed by
governments (including states, provinces or municipalities) of countries other
than the United States, or by their agencies, authorities or instrumentalities.
The percentage of assets invested in securities of a particular country or
denominated in a particular currency will vary in accordance with the Adviser's
or Sub-Adviser's assessment of gross domestic product in relation to aggregate
debt, current account surplus or deficit, the trend of the current account,
reserves available to defend the currency, and the monetary and fiscal policies
of the government.
FOREIGN CURRENCY TRANSACTIONS
In order to protect against a possible loss on investments resulting
from a decline or appreciation in the value of a particular foreign currency
against the U.S. dollar or another foreign currency or for other reasons, the
International Equity, Equity Income, Balanced Allocation, Total Return
Advantage, Enhanced Income, Mid Cap Growth and U.S. Government Income Funds are
authorized to enter into forward currency exchange contracts. These contracts
involve an obligation to purchase or sell a specified currency at a future date
at a price set at the time of the contract. Forward currency contracts do not
eliminate fluctuations in the values of portfolio securities but rather allow
the Funds to establish a rate of exchange for a future point in time.
When entering into a contract for the purchase or sale of a security,
these Funds may enter into a forward foreign currency exchange contract for the
amount of the purchase or sale price to protect against variations, between the
date the security is purchased or sold and the date on which payment is made or
received, in the value of the foreign currency relative to the U.S. dollar or
other foreign currency.
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When the Adviser or Sub-Adviser anticipates that a particular foreign
currency may decline substantially relative to the U.S. dollar or other leading
currencies, in order to reduce risk, the a Fund may enter into a forward
contract to sell, for a fixed amount, the amount of foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency. Similarly, when the obligations held by the Fund create a
short position in a foreign currency, the Fund may enter into a forward contract
to buy, for a fixed amount, an amount of foreign currency approximating the
short position. With respect to any forward foreign currency contract, it will
not generally be possible to match precisely the amount covered by that contract
and the value of the securities involved due to the changes in the values of
such securities resulting from market movements between the date the forward
contract is entered into and the date it matures. In addition, while forward
contracts may offer protection from losses resulting from declines or
appreciation in the value of a particular foreign currency, they also limit
potential gains which might result from changes in the value of such currency. A
Fund will also incur costs in connection with forward foreign currency exchange
contracts and conversions of foreign currencies and U.S. dollars.
A separate account consisting of liquid assets, such as cash, U.S.
Government securities or other liquid high grade debt obligations equal to the
amount of the International Equity, Equity Income, Balanced Allocation, Total
Return Advantage and Enhanced Income Funds' assets that could be required to
consummate forward contracts will be established with the Trust's custodian
except to the extent the contracts are otherwise "covered." For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market or fair value. If the market or fair value
of such securities declines, additional cash or liquid securities will be placed
in the account daily so that the value of the account will equal the amount of
such commitments by the Funds. A forward contract to sell a foreign currency is
"covered" if the Fund owns the currency (or securities denominated in the
currency) underlying the contract, or holds a forward contract (or call option)
permitting the Fund to buy the same currency at a price no higher than the
Fund's price to sell the currency. A forward contract to buy a foreign currency
is "covered" if the Fund holds a forward contract (or call option) permitting
the Funds to sell the same currency at a price as high as or higher than the
Fund's price to buy the currency.
EXCHANGE RATE-RELATED SECURITIES
The International Equity, Equity Income, Balanced Allocation, Total
Return Advantage and Enhanced Income Funds may invest in debt securities for
which the principal due at maturity, while paid in U.S. dollars, is determined
by reference to the exchange rate between the U.S. dollar and the currency of
one or more foreign countries ("Exchange Rate-Related Securities"). The interest
payable on these securities is also denominated in U.S. dollars and is not
subject to foreign currency risk and, in most cases, is paid at rates higher
than most other similarly rated securities in recognition of the risks
associated with these securities. There is the possibility of significant
changes in rates of exchange between the U.S. dollar and any foreign currency to
which an Exchange Rate-Related Security is linked. In addition, there is no
assurance that sufficient trading interest to create a liquid secondary market
will exist for a particular Exchange Rate-Related Security due to conditions in
the debt and foreign currency markets. Illiquidity in the forward foreign
exchange market and the high volatility of the foreign
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exchange market may, from time to time, combine to make it difficult to sell an
Exchange Rate-Related Security prior to maturity without incurring a significant
price loss.
CONVERTIBLE SECURITIES
The Equity Growth, Balanced Allocation and Mid Cap Growth Funds may
invest in convertible securities entitling the holder to receive interest paid
or accrued on debt or the dividend paid on preferred stock until the securities
mature or are redeemed, converted or exchanged. Prior to conversion, convertible
securities have characteristics similar to ordinary debt securities in that they
normally provide a stable stream of income with generally higher yields than
those of common stock of the same or similar issuers. Convertible securities
rank senior to common stock in a corporation's capital structure and therefore
generally entail less risk than the corporation's common stock. The value of the
convertibility feature depends in large measure upon the degree to which the
convertible security sells above its value as a fixed income security.
In selecting convertible securities, the Adviser or Sub-Adviser will
consider, among other factors, the creditworthiness of the issuers of the
securities; the interest or dividend income generated by the securities; the
potential for capital appreciation of the securities and the underlying common
stocks; the prices of the securities relative to other comparable securities and
to the underlying common stocks; whether the securities are entitled to the
benefits of sinking funds or other protective conditions; diversification of the
Fund's portfolio as to issuers; and the ratings of the securities. Since credit
rating agencies may fail to timely change the credit ratings of securities to
reflect subsequent events, the Adviser or Sub-Adviser will consider whether such
issuers will have sufficient cash flow and profits to meet required principal
and interest payments. A Fund may retain a portfolio security whose rating has
been changed if the Adviser deems that retention of such security is warranted.
CORPORATE DEBT OBLIGATIONS
The Balanced Allocation, Total Return Advantage, Bond, Intermediate
Bond, GNMA, Enhanced Income, Mid Cap Growth, U.S. Government Income, Michigan
Municipal Bond and the Money Market Funds may invest in corporate debt
obligations. In addition to obligations of corporations, corporate debt
obligations include securities issued by banks and other financial institutions.
Corporate debt obligations are subject to the risk of an issuer's inability to
meet principal and interest payments on the obligations.
OTHER DEBT SECURITIES
The Balanced Allocation, Total Return Advantage, Intermediate Bond and
Enhanced Income Funds may also invest in debt securities which may include:
equipment lease and trust certificates; collateralized mortgage obligations;
state, municipal and private activity bonds; obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities; securities of
supranational organizations such as the World Bank; participation certificates
in pools of mortgages, including mortgages issued or guaranteed by the U.S.
government, its agencies or instrumentalities; asset-backed securities such as
mortgage backed securities,
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Certificates of Automobile Receivables ("CARS") and Certificates of Amortizing
Revolving Debts ("CARDS"); private placements; and income participation loans.
Some of the securities in which the Fund invests may have warrants or options
attached.
The Balanced Allocation, Total Return Advantage, Intermediate Bond and
Enhanced Income Funds' appreciation may result from an improvement in the credit
standing of an issuer whose securities are held or a general decline in the
level of interest rates or a combination of both. An increase in the level of
interest rates generally reduces the value of the fixed rate debt instruments
held by the Fund; conversely, a decline in the level of interest rates generally
increases the value of such investments. An increase in the level of interest
rates may temporarily reduce the value of the floating rate debt instruments
held by the Fund; conversely, a decline in the level of interest rates may
temporarily increase the value of those investments.
The Balanced Allocation, Total Return Advantage, Intermediate Bond,
and Enhanced Income Funds invest only in investment grade debt securities
which are rated at the time of purchase within the four highest ratings
groups assigned by Moody's (Aaa, Aa, A and Baa), ("S&P) (AAA, AA, A and BBB),
Fitch (AAA, AA, A and BBB), or Duff (AAA, AA, A and BBB) or, if unrated,
which are determined by the Fund's adviser to be of comparable quality
pursuant to guidelines approved by the Trust's Board of Trustees. Debt
securities rated in the lowest investment grade debt category (Baa by Moody's
or BBB by S&P, Fitch or Duff or IBCA) may have speculative characteristics;
changes in economic conditions or other circumstances are more likely to lead
to a weakened capacity to make principal and interest payments than is the
case with higher grade securities.
In the event that subsequent to its purchase by the Fund, a rated
security ceases to be rated or its rating is reduced below investment grade, the
adviser will consider whether the Fund should continue to hold the security. The
adviser expects, however, to sell promptly any securities that are
non-investment grade as a result of such events that exceed 5% of the Fund's net
assets where the adviser has determined that such sale is in the best interest
of the Fund.
RISKS RELATED TO LOWER RATED SECURITIES WHICH MAY BE PURCHASED BY THE TOTAL
RETURN ADVANTAGE FUND
While any investment carries some risk, certain risks associated with
lower rated securities (commonly referred to as "junk bonds") are different than
those for investment grade securities. The risk of loss through default is
greater because lower rated securities are usually unsecured and are often
subordinate to an issuer's other obligations. Additionally, the issuers of these
securities frequently have high debt levels and are thus more sensitive to
difficult economic conditions, individual corporate developments and rising
interest rates. Consequently, the market price of these securities may be quite
volatile and may result in wider fluctuations in the Total Return Advantage
Fund's net asset value per share.
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In addition, an economic downturn or increase in interest rates could
have a negative impact on both the markets for lower rated securities (resulting
in a greater number of bond defaults) and the value of lower rated securities
held by the Total Return Advantage Fund. Current laws, such as those requiring
federally insured savings and loan associations to remove investments in lower
rated securities from their funds, as well as other pending proposals, may also
have a material adverse effect on the market for lower rated securities.
The economy and interest rates may affect lower rated securities
differently than other securities. For example, the prices of lower rated
securities are more sensitive to adverse economic changes or individual
corporate developments than are the prices of higher rated investments. In
addition, during an economic downturn or period in which interest rates are
rising significantly, highly leveraged issuers may experience financial
difficulties, which, in turn, would adversely affect their ability to service
their principal and interest payment obligations, meet projected business goals
and obtain additional financing.
If an issuer of a security held by the Total Return Advantage Fund
defaults, the Fund may incur additional expenses to seek recovery. In addition,
periods of economic uncertainty would likely result in increased volatility for
the market prices of lower rated securities as well as the Fund's net asset
value. In general, both the prices and yields of lower rated securities will
fluctuate.
In certain circumstances it may be difficult to determine a security's
fair value due to a lack of reliable objective information. Such instances occur
where there is no established secondary market for the security or the security
is lightly traded. As a result, the Total Return Advantage Fund's valuation of a
security and the price it is actually able to obtain when it sells the security
could differ.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the value and liquidity of lower rated
securities held by the Total Return Advantage Fund, especially in a thinly
traded market. Illiquid or restricted securities held by the Fund may involve
special registration responsibilities, liabilities and costs, and could involve
other liquidity and valuation difficulties.
The ratings of Moody's, S&P, Fitch and Duff evaluate the safety
of a lower rated security's principal and interest payments, but do not address
market value risk. Because the ratings of the rating agencies may not always
reflect current conditions and events, in addition to using recognized rating
agencies and other sources, the Sub-adviser performs its own analysis of the
issuers of lower rated securities purchased by the Fund. Because of this, the
Fund's performance may depend more on its own credit analysis than is the case
for mutual funds investing in higher rated securities.
The Sub-adviser continuously monitors the issuers of lower rated
securities held by the Total Return Advantage Fund for their ability to make
required principal and interest payments, as well as in an effort to control the
liquidity of the Fund so that it can meet redemption requests.
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WARRANTS
The International Equity, Small Cap Value, Small Cap Growth, Equity
Growth, Tax Managed Equity, Core Equity, Equity Income, Balanced Allocation and
Mid Cap Growth Funds may invest in warrants. Warrants enable the owner to
subscribe to and purchase a specified number of shares of the issuing
corporation at a specified price during a specified period of time. The prices
of warrants do not necessarily correlate with the prices of the underlying
securities. The purchase of warrants involves the risk that the purchaser could
lose the purchase value of the warrant if the right to subscribe to additional
shares is not exercised prior to the warrant's expiration. Also, the purchase of
warrants involves the risk that the effective price paid for the warrant added
to the subscription price of the related security may exceed the value of the
subscribed security's market price such as when there is no movement in the
level of the underlying security.
FUTURES AND RELATED OPTIONS
The International Equity, Small Cap Value, Small Cap Growth, Equity
Growth, Tax Managed Equity, Core Equity, Equity Index, Equity Income and Mid Cap
Growth Funds may invest in stock index futures contracts and options of futures
contracts in attempting to hedge against changes in the value of securities that
it holds or intends to purchase. The Balanced Allocation Fund may invest in
stock index, interest rate, bond index and foreign currency futures contracts
and options on these futures contracts. The Total Return Advantage, Bond and
Enhanced Income Funds may invest in interest rate and Bond index futures
contracts and options on futures contracts and the Bond and GNMA Funds may
invest in futures contracts on U.S. Treasury Obligations in order to offset an
expected decrease in the value of their respective portfolios that might
otherwise result from a market decline. The International Equity, Small Cap
Value, Small Cap Growth, Equity Growth, Tax Managed Equity, Equity Index and
Equity Income Funds may invest in stock index futures contracts in attempting to
hedge against changes in the value of securities that it holds or intends to
purchase or to maintain liquidity. The International Equity Fund may also invest
in foreign current futures contract and options in anticipation of changes in
currency exchange rates. The U.S. Government Income Fund may invest in futures
contracts on U.S. Treasury obligations. A Fund might sell a futures contract in
order to offset an expected decrease in the value of its portfolio that might
otherwise result from a market decline. Each of these Funds may invest in the
instruments described either to hedge the value of their respective portfolio
securities as a whole, or to protect against declines occurring prior to sales
of securities in the value of the securities to be sold. Conversely, a Fund may
purchase a futures contract in anticipation of purchases of securities. In
addition, each of these Funds may utilize futures contracts in anticipation of
changes in the composition of its holdings for hedging purposes or to maintain
liquidity.
Futures contracts obligate a Fund, at maturity, to take or make
delivery of certain securities or the cash value of an index or the cash value
of a stated amount of a foreign currency. When interest rates are rising,
futures contracts can offset a decline in value of the securities
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held by a Fund. When rates are falling or prices of securities are rising, these
contracts can secure higher yields for securities a Fund intends to purchase.
Each of the International Equity, Small Cap Value, Small Cap Growth,
Equity Growth, Tax Managed Equity, Equity Index, Equity Income, Balanced
Allocation, Total Return Advantage, Bond, GNMA, Enhanced Income, Mid Cap Growth
and U.S. Government Income Funds intend to comply with the regulations of the
Commodity Futures Trading Commission (CFTC) exempting it from registration as
a "commodity pool operator." A Fund's commodities transactions must constitute
bona fide hedging or other permissible transactions pursuant to such
regulations. In addition, a Fund may not engage in such transactions if the sum
of the amount of initial margin deposits and premiums paid for unexpired
commodity options, other than for bona fide hedging transactions, would exceed
5% of the liquidation value of its assets, after taking into account unrealized
profits and unrealized losses on such contracts it has entered into; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the percentage
limitation. In connection with a Fund's position in a futures contract or option
thereon, it will create a segregated account of liquid assets, such as cash,
U.S. government securities or other liquid high grade debt obligations, or will
otherwise cover its position in accordance with applicable requirements of the
SEC.
The International Equity, Small Cap Value, Small Cap Growth, Equity
Growth, Tax Managed Equity, Equity Index, Equity Income, Balanced Allocation,
Total Return Advantage, Enhanced Income, Mid Cap Growth and U.S. Government
Income Funds may purchase and sell call and put options on futures contracts
traded on an exchange or board of trade. When a Fund purchases an option on
a futures contract, it has the right to assume a position as a purchaser or
seller of a futures at a specified exercise price at any time during the
option period. When a Fund sells an option on a futures contract, it becomes
obligated to purchase or sell a futures contract if the option is exercised.
In anticipation of a market advance, a Fund may purchase call options on
futures contracts as a substitute for hte purchase of futures contracts to
hedge against a possible increase in the price of securities which the Fund
intends to purchase. Similarly, if the value of a Fund's securities is
expected to decline, it might purchase put options or sell call options on
futures contracts.
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The Funds may write covered call options, buy put options, buy call
options and sell or "write" secured put options on a national securities
exchange and issued by the Options Clearing Corporation for hedging purposes.
Such transactions may be effected on a principal basis with primary reporting
dealers in U.S. government securities in an amount not exceeding 5% of a Fund's
net assets. Such options may relate to particular securities, stock or bond
indices, financial instruments or foreign currencies. Purchasing options is a
specialized investment technique which entails a substantial risk of a complete
loss of the amounts paid as premiums to the writer of the option.
A call option for a particular security gives the purchaser of the
option the right to buy, and a writer the obligation to sell, the underlying
security at the stated exercise price at any time prior to or only at the
expiration of the option, regardless of the market price of the security. The
premium paid to the writer is the consideration for undertaking the obligations
under the option contract. A put option for a particular security gives the
purchaser the right to sell the underlying security at the stated exercise price
at any time prior to the expiration date of the option, regardless of the market
price of the security. In contrast to an option on a particular security, an
option on a securities index provides the holder with the right to make or
receive a cash settlement upon exercise of the option.
Each Fund may purchase and sell put options on portfolio securities at
or about the same time that it purchases the underlying security or at a later
time. By buying a put, a Fund limits its risk of loss from a decline in the
market value of the security until the put expires. Any appreciation in the
value of and yield otherwise available from the underlying security, however,
will be partially offset by the amount of the premium paid for the put option
and any related transaction costs. Call options may be purchased by a Fund in
order to acquire the underlying security at a later date at a price that avoids
any additional cost that would result from an increase in the market value of
the security. A Fund may also purchase call options to increase its return to
investors at a time when the call is expected to increase in value due to
anticipated appreciation of the underlying security. Prior to its expiration, a
purchased put or call option may be sold in a closing sale transaction (a sale
by a Fund, prior to the exercise of an option that it has purchased, of an
option of the same series), and profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the option
plus the related transaction costs.
In addition, each Fund may write covered call and secured put options.
A covered call option means that a Fund owns or has the right to acquire the
underlying security subject to call at all times during the option period. A
secured put option means that a Fund maintains in a segregated account with its
custodian cash or U.S. government securities in an amount not less than the
exercise price of the option at all times during the option period. Such options
will be
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listed on a national securities exchange and issued by the Options Clearing
Corporation and may be effected on a principal basis with primary reporting
dealers in the U.S.
The aggregate value of the securities subject to options written by a
Fund will not exceed 25% of the value of its net assets. In order to close out
an option position prior to maturity, a Fund may enter into a "closing purchase
transaction" by purchasing a call or put option (depending upon the position
being closed out) on the same security with the same exercise price and
expiration date as the option which it previously wrote.
Options trading is a highly specialized activity and carries greater
than ordinary investment risk. Purchasing options may result in the complete
loss of the amounts paid as premiums to the writer of the option. In writing a
covered call option, a Fund gives up the opportunity to profit from an increase
in the market price of the underlying security above the exercise price (except
to the extent the premium represents such a profit). Moreover, it will not be
able to sell the underlying security until the covered call option expires or is
exercised or a Fund closes out the option. In writing a secured put option, a
Fund assumes the risk that the market value of the security will decline below
the exercise price of the option. The use of covered call and secured put
options will not be a primary investment technique of a Fund. For a detailed
description of these investments and related risks, see Appendix B attached to
this Statement of Additional Information.
RISK FACTORS ASSOCIATED WITH FUTURES AND RELATED OPTIONS
To the extent the Total Return Advantage, Bond, GNMA and Enhanced
Income Funds are engaging in a futures transaction as a hedging device, due to
the risk of an imperfect correlation between securities in their funds that are
the subject of a hedging transaction and the futures contract used as a hedging
device, it is possible that the hedge will not be fully effective in that, for
example, losses on the portfolio securities may be in excess of gains on the
futures contract or losses on the futures contract may be in excess of gains on
the portfolio securities that were the subject of the hedge. In futures
contracts based on indices, the risk of imperfect correlation increases as the
composition of the Funds varies from the composition of the index. In an effort
to compensate for the imperfect correlation of movements in the price of the
securities being hedged and movements in the price of futures contracts, the
Funds may buy or sell futures contracts in a greater or lesser dollar amount
than the dollar amount of the securities being hedged if the historical
volatility of the futures contract has been less or greater than that of the
securities. Such "over hedging" or "under hedging" may adversely affect a Fund's
net investment results if market movements are not as anticipated when the hedge
is established.
Successful use of futures by the Funds also are subject to the
Adviser's or Sub-adviser's ability to predict correctly movements in the
direction of securities prices, interest rates and other economic factors. For
example, if the Funds have hedged against the possibility of a decline in the
market adversely affecting the value of securities held in their funds and
prices increase instead, the Funds will lose part or all of the benefit of the
increased value of securities which they have hedged because they will have
offsetting losses in their futures positions. In addition, in such situations,
if a Fund has insufficient cash, it may have to sell securities to meet
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daily variation margin requirements. Such sales of securities may, but will not
necessarily, be at increased prices which reflect the rising market. The Funds
may have to sell securities at a time when it may be disadvantageous to do so.
Although the Total Return Advantage, Bond, GNMA and Enhanced Income
Funds intend to enter into futures contracts and the Total Return Advantage and
Enhanced Income Funds into options transactions only if there is an active
market for such investments, no assurance can be given that a liquid market will
exist for any particular contract or transaction at any particular time. See
"Illiquid Securities." Many futures exchanges and boards of trade limit the
amount of fluctuation permitted in futures contract prices during a single
trading day. Once the daily limit has been reached in a particular contract, no
trades may be made that day at a price beyond that limit or trading may be
suspended for specified periods during the trading day. Futures contracts prices
could move to the limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting the Funds to substantial losses. If it is not possible,
or a Fund determines not, to close a futures position in anticipation of adverse
price movements, it will be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the portion of the
Fund being hedged, if any, may offset partially or completely losses on the
futures contract.
The primary risks associated with the use of futures contracts and
options are:
1. the imperfect correlation between the change in market value of the
securities held by a Fund and the price of the futures contract or option;
2. possible lack of a liquid secondary market for a futures contract
and the resulting inability to close a futures contract when desired;
3. losses greater than the amount of the principal invested as initial
margin due to unanticipated market movements which are potentially unlimited;
and
4. the Adviser's or Sub-adviser's, in the case of the Total Return
Advantage Fund, ability to predict correctly the direction of securities prices,
interest rates and other economic factors.
MORTGAGE-BACKED SECURITIES
The Balanced Allocation, Total Return Advantage, Bond, Intermediate
Bond, GNMA, Enhanced Income and U.S. Government Income Funds may purchase
securities that are secured or backed by mortgages and are issued by entities
such as Government National Mortgage Association (GNMA), Federal National
Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC),
or private mortgage conduits.
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Mortgage-backed securities represent an ownership interest in a pool
of mortgages, the interest and principal payments on which may be guaranteed by
an agency or instrumentality of the U.S. government, although not necessarily by
the U.S. government itself. Mortgage-backed securities include CMOs and mortgage
pass-through certificates.
Mortgage pass-through certificates, which represent interests in pools
of mortgage loans, provide the holder with a pro rata interest in the underlying
mortgages. One type of such certificate in which the Fund may invest is a GNMA
Certificate which is backed as to the timely payment of principal and interest
by the full faith and credit of the U.S. government. Another type is a FNMA
Certificate, the principal and interest of which are guaranteed only by FNMA
itself, not by the full faith and credit of the U.S. government. Another type is
a FHLMC Participation Certificate which is guaranteed by FHLMC as to timely
payment of principal and interest. However, like a FNMA security it is not
guaranteed by the full faith and credit of the U.S. government. Privately issued
mortgage backed securities will carry an investment grade rating at the time of
purchase by S&P or by Moody's or, if unrated, will be in the adviser's opinion
equivalent in credit quality to such rating. Mortgage-backed securities issued
by private issuers, whether or not such obligations are subject to guarantees by
the private issuer, may entail greater risk than obligations directly or
indirectly guaranteed by the U.S. government.
The yield and average life characteristics of mortgage-backed
securities differ from traditional debt securities. A major difference is that
the principal amount of the obligations may be prepaid at any time because the
underlying assets (i.e., loans) generally may be prepaid at any time. As a
result, if a mortgage-backed security is purchased at a premium, a prepayment
rate that is faster than expected will reduce the expected yield to maturity and
average life, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity and average life. Conversely, if
a mortgage-backed security is purchased at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will decrease,
the expected yield to maturity and average life. There can be no assurance that
the Trust's estimation of the duration of mortgage-backed securities it holds
will be accurate or that the duration of such instruments will always remain
within the maximum target duration. In calculating the average weighted maturity
of the Funds, the maturity of mortgage-backed securities will be based on
estimates of average life.
Prepayments on mortgage-backed securities generally increase with
falling interest rates and decrease with rising interest rates; furthermore,
prepayment rates are influenced by a variety of economic and social factors.
Like other fixed income securities, when interest rates rise, the value of
mortgage-backed securities generally will decline; however, when interest rates
decline, the value of mortgage-backed securities may not increase as much as
that of other similar duration fixed income securities, and, as noted above,
changes in market rates of interest may accelerate or retard prepayments and
thus affect maturities.
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These characteristics may result in a higher level of price volatility
for these assets under certain market conditions. In addition, while the market
for Mortgage-backed securities is ordinarily quite liquid, in times of financial
stress the market for these securities can become restricted.
DOLLAR ROLLS
The Balanced Allocation, U.S. Government Income and Michigan Tax
Exempt Bond Funds may invest in reverse repurchase agreements in the form of
Dollar Rolls. Dollar Rolls are transactions in which securities are sold by the
Fund for delivery in the current month and the Fund simultaneously contracts to
repurchase substantially similar securities on a specified future date. Any
difference between the sale price and the purchase price is netted against the
interest income foregone on the securities sold to arrive at an implied
borrowing rate. Alternatively, the sale and purchase transactions can be
executed at the same price, with the Fund being paid a fee as consideration for
entering into the commitment to purchase. Dollar Rolls may be renewed prior to
cash settlement and initially may involve only a firm commitment agreement by
the Fund to buy a security. If the broker-dealer to which the Fund sells the
security becomes insolvent, the Fund's right to repurchase the security may be
restricted. Other risks involved in entering into Dollar Rolls include the risk
that the value of the security may change adversely over the term of the Dollar
Roll and that the security the Fund is required to repurchase may be worth less
than the security that the Fund originally held. At the time a Fund enters into
a Dollar Roll, it will place in a segregated custodial account assets such as
U.S. government securities or other liquid, high grade debt securities
consistent with the Fund's investment restrictions having a value equal to the
repurchase price (including accrued interest), and will subsequently monitor the
account to ensure that such equivalent value is maintained.
SHORT SALES
The Tax Managed Equity, Balanced Allocation, GNMA, Mid Cap Growth,
U.S. Government Income and Michigan Tax Exempt Bond Funds may engage in short
sales of its securities. Selling securities short involves selling securities
the seller does not own (but has borrowed) in anticipation of a decline in the
market price of such securities. To deliver the securities to the buyer, the
seller must arrange through a broker to borrow the securities and, in so doing,
the seller becomes obligated to replace the securities borrowed at their market
price at the time of replacement. In a short sale, the proceeds the seller
receives from the sale are retained by a broker until the seller replaces the
borrowed securities. The seller may have to pay a premium to borrow the
securities and must pay any dividends or interest payable on the securities
until they are replaced.
ASSET-BACKED SECURITIES
As described in the Prospectus, the Balanced Allocation, Total Return
Advantage and the Fixed Income Funds may purchase asset-backed securities, which
are securities backed by mortgages, installment contracts, credit card
receivables or other assets. Asset-backed securities
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represent interests in "pools" of assets in which payments of both interest and
principal on the securities are made monthly, thus in effect "passing through"
monthly payments made by the individual borrowers on the assets that underlie
the securities, net of any fees paid to the issuer or guarantor of the
securities. The average life of asset-backed securities varies with the
maturities of the underlying instruments, and the average life of a
mortgage-backed instrument, in particular, is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities as a
result of mortgage prepayments. For this and other reasons, an asset-backed
security's stated maturity may be shortened, and the security's total return may
be difficult to predict precisely. Asset-backed securities acquired by the Fund
may include collateralized mortgage obligations (CMOs) issued by private
companies.
In general, the collateral supporting non-mortgage, asset-backed
securities is of shorter maturity than mortgage loans and is less likely to
experience substantial prepayments. Such securities may also be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity organized solely for
the purpose of owning such assets and issuing such debt. Asset-backed securities
are not issued or guaranteed by the U.S. government or its agencies or
instrumentalities.
Each Fund may invest in securities the timely payment of principal
and interest on which are guaranteed by the GNMA a wholly-owned U.S.
Government corporation within the Department of Housing and Urban
Development. The market value and interest yield of these instruments can
vary due to market interest rate fluctuations and early prepayments of
underlying mortgages. These securities represent ownership in a pool of
federally insured mortgage loans. GNMA certificates consist of underlying
mortgages with a maximum maturity of 30 years. However, due to scheduled and
unscheduled principal payments, GNMA certificates have a shorter average
maturity and, therefore, less principal volatility than a comparable 30-year
bond. Since prepayment rates vary widely, it is not possible to predict
accurately the average maturity of a particular GNMA pool. GNMA securities
differ from conventional bonds in that principal is paid back to the
certificate holders over the life of the loan rather than at maturity. The
scheduled monthly interest and principal payments relating to mortgages in
the pool are "passed through" to investors. In addition, there may be
unscheduled principal payments representing prepayments on the underlying
mortgages. Although GNMA certificates may offer yields higher than those
available from other types of U.S. Government securities, GNMA certificates
may be less effective than other types of securities as a means of "locking
in" attractive long-term rates because of the prepayment feature. For
instance, when interest rates decline, the value of a GNMA certificate likely
will not rise as much as comparable debt securities due to the prepayment
feature. In addition, these prepayments can cause the price of a GNMA
certificate originally purchased at a premium to decline in price to its par
value, which may result in a loss.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related
securities and among the securities that they issue. Mortgage-related
securities guaranteed by the GNMA include GNMA Mortgage Pass-Through
Certificates (also known as Ginnie Maes) which are guaranteed as to the
timely payment of principal and interest by GNMA and such guarantee is backed
by the full faith
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and credit of the United States. GNMA is a wholly-owned U.S. Government
corporation within the Department of Housing and Urban Development. GNMA
certificates also are supported by the authority of GNMA to borrow funds from
the U.S. Treasury to make payments under its guarantee. Mortgage-backed
securities issued by the FNMA include FNMA Guaranteed Mortgage Pass-Through
Certificates (also known as "Fannie Maes") which are solely the obligations of
the FNMA and are not backed by or entitled to the full faith and credit of the
United States, but are supported by the right of the issuer to borrow from the
Treasury. FNMA is a government-sponsored organization owned entirely by private
stockholders. Fannie Maes are guaranteed as to timely payment of the principal
and interest by FNMA. Mortgage-related securities issued by the FHLMC include
FHLMC Mortgage Participation Certificates (also known as "Freddie Macs" or
"Pcs"). FHLMC is a corporate instrumentality of the United States, created
pursuant to an Act of Congress, which is owned entirely by Federal Home Loan
Banks. Freddie Macs are not guaranteed by the United States or by any Federal
Home Loan Banks and do not constitute a debt or obligation of the United States
or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely
payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either
ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. When FHLMC does not guarantee timely payment of
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
Non-mortgage asset-backed securities involve certain risks that are
not presented by mortgage-backed securities. Primarily, these securities may not
have the benefit of the same security interest in the underlying collateral.
Credit card receivables are generally unsecured and the debtors are entitled to
the protection of a number of state and federal consumer credit laws, many of
which have given debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the balance due. Most issuers of automobile receivables
permit the servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have an
effective security interest in all of the obligations backing such receivables.
Therefore, there is a possibility that recoveries on repossessed collateral may
not, in some cases, be able to support payments on these securities.
INTEREST RATE AND TOTAL RETURN SWAPS
The Balanced Allocation, Total Return Advantage, GNMA, Enhanced Income
and U.S. Government Income Funds may enter into interest rate swaps for hedging
purposes and not for speculation. The Balance Allocation Fund may also use total
return swaps for the same purposes. Fund will typically use interest rate or
total return swaps to preserve a return on a particular investment or portion of
its portfolio or to shorten the effective duration of its investments. Swaps
involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest or the total return of a predefined
"index," such as an exchange of fixed rate
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payments for floating rate payments or an exchange of a floating rate payment
for the total return on an index.
The net amount of the excess, if any, of a Fund's obligations over its
entitlements with respect to each interest rate swap will be accrued on a daily
basis and an amount of liquid assets, such as cash, U.S. government securities
or other liquid high grade debt securities, having an aggregate net asset value
at least equal to such accrued excess will be maintained in a segregated account
by the Fund's custodian. A Fund will not enter into any interest rate swap
unless the unsecured commercial paper, senior debt, or claims paying ability of
the other party is rated, with respect to the Enhanced Income and Total Return
Advantage Funds, either "A" or "A-1" or better by S&P, Duff or Fitch, or "A" or
"P-1" or better by Moody's or, with respect to the GNMA Fund, the claims paying
ability of the other party is deemed creditworthy and any such obligation the
GNMA Fund may have under such an arrangement will be covered by setting aside
liquid high grade securities in a segregated account.
The Balanced Allocation, Total Return Advantage, GNMA, and Enhanced
Income Fund will only enter into swaps on a net basis, (i.e., the two payment
streams are netted out, with the Fund receiving or paying, as the case may be,
only the net amount of the two payments). Inasmuch as these transactions are
entered into for good faith hedging purposes, the Funds and their respective
Adviser or Sub-adviser believe that such obligations do not constitute senior
securities as defined in the 1940 Act and, accordingly, will not treat them as
being subject to the Fund's borrowing restrictions. The net amount of the
excess, if any, of the Fund's obligations over their entitlements with respect
to each swap will be accrued on a daily basis and an amount of liquid assets,
such as cash, U.S. government securities or other liquid high grade debt
securities, having an aggregate net asset value at least equal to such accrued
excess will be maintained in a segregated account by the Fund's custodian.
If there is a default by the other party to a swap transaction, the
Fund involved will have contractual remedies pursuant to the agreements related
to the transaction. The swap market has grown substantially in recent years with
a large number of banks and investment banking firms acting both as principals
and as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid in comparison with markets for other similar
instruments which are traded in the Interbank market.
ZERO COUPON OBLIGATIONS
The Ohio Tax-Exempt Funds, U.S. Government Income and Michigan
Municipal Bond Funds may invest in zero coupon obligations. Zero coupon
obligations are discount debt obligations that do not make periodic interest
payments although income is generally imputed to the holder on a current
basis. Such obligations may have higher price volatility than those which
require the payment of interest periodically. The Adviser will consider the
liquidity needs of the Fund when any investment in zero coupon obligations is
made.
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INCOME PARTICIPATION LOANS
The Balanced Allocation, Total Return Advantage, Intermediate Bond,
and Enhanced Income Funds may make or acquire participations in privately
negotiated loans to borrowers. Frequently, such loans have variable interest
rates and may be backed by a bank letter of credit; in other cases they may be
unsecured. Such transactions may provide an opportunity to achieve higher yields
than those that may be available from other securities offered and sold to the
general public.
Privately arranged loans, however, will generally not be rated by a
credit rating agency and will normally be liquid, if at all, only through a
provision requiring repayment following demand by the lender. Such loans made by
a Fund may have a demand provision permitting the Fund to require repayment
within seven days. Participations in such loans, however, may not have such a
demand provision and may not be otherwise marketable. Recovery of an investment
in any such loan that is illiquid and payable on demand will depend on the
ability of the borrower to meet an obligation for full repayment of principal
and payment of accrued interest within the demand period, normally seven days or
less (unless the Fund determines that a particular loan issue, unlike most such
loans, has a readily available market). As it deems appropriate, the Board of
Trustees of the Trust will establish procedures to monitor the credit standing
of each such borrower, including its ability to honor contractual payment
obligations.
CERTIFICATES OF PARTICIPATION
The Michigan Municipal Bond Fund may purchase Michigan Municipal
Securities in the form of "certificates of participation" which represent
undivided proportional interests in lease payments by a governmental or
nonprofit entity. The Tax-Exempt Funds may also purchase certificates of
participation. The municipal leases underlying the certificates of participation
in which the Fund invests will be subject to the same quality rating standards
applicable to Municipal Securities. Certificates of participation may be
purchased from a bank, broker-dealer or other financial institution. The lease
payments and other rights under the lease provide for and secure the payments on
the certificates.
Lease obligations may be limited by law, municipal charter or the
duration or nature of the appropriation for the lease and may be subject to
periodic appropriation. In particular, lease obligations, may be subject to
periodic appropriation. If the entity does not appropriate funds for future
lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the certificate trustee cannot accelerate
lease obligations upon default; in such event, the trustee would only be able to
enforce lease payments as they became due. In the event of a default or failure
of appropriation, it is unlikely that the trustee would be able to obtain an
acceptable substitute source of payment. In addition, certificates of
participation are less liquid than other bonds because there is a limited
secondary trading market for such obligations.
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WHEN-ISSUED SECURITIES
The International Equity, Small Cap Value, Small Cap Growth, Equity
Growth, Tax Managed Equity, Core Equity, Equity Income, Balanced Allocation,
Total Return Advantage, Bond, Intermediate Bond, GNMA, Enhanced Income, Ohio
Municipal Money Market, Pennsylvania Tax Exempt Money Market, Tax Exempt
Money Market, Mid Cap Growth and U.S. Government Income Funds may purchase
securities (Municipal Securities in the case of the Ohio Tax Exempt Bond,
Pennsylvania Municipal Bond, National Tax Exempt Bond and Michigan Municipal
Funds) on a "when-issued" basis (i.e., for delivery beyond the normal
settlement date at a stated price and yield). 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, a 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. One form of when-issued or delayed delivery
security that the GNMA and Bond Funds may purchase is a "to be announced"
(TBA) mortgage-backed security. A TBA transaction arises when a
mortgage-backed security, such as a GNMA pass-through security, is purchased
or sold with the specific pools that will constitute that GNMA pass-through
security to be announced on a future settlement date.
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 a 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 a Fund will set aside cash or liquid assets to satisfy its purchase
commitments in the manner described, the Fund's liquidity and ability to manage
its portfolio might be affected in the event its commitments to purchase
when-issued securities ever exceeded 25% of the value of its total assets.
When a Fund engages in when-issued transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in the
Fund's incurring a loss or missing an opportunity to obtain a price considered
to be advantageous. A Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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SHORT-TERM OBLIGATIONS
The International Equity, Small Cap Value, Small Cap Growth, Equity
Growth, Tax Managed Equity, Core Equity, Equity Index, Equity Income, Balanced
Allocation, Total Return Advantage, Bond, Intermediate Bond, GNMA, Enhanced
Income, and U.S. Government Income Funds may hold temporary cash balances which
may be invested in various short-term obligations (with maturities of 18 months
or less, 12 months in the case of the U.S. Government Income Fund) such as
domestic and foreign commercial paper, bankers' acceptances, certificates of
deposit and demand and time deposits of domestic and foreign branches of U.S.
banks and foreign banks, U.S. government securities, repurchase agreements,
reverse repurchase agreements and (GICs). The Equity Index Fund cannot invest
in foreign commercial paper and GICs. A Fund may invest no more than 5% of
its net assets in variable and floating rate obligations. During temporary
defensive periods, each Fund may hold up to 100% of its total assets in these
types of obligations.
In the case of repurchase agreements, default or bankruptcy of the
seller may expose a Fund to possible loss because of adverse market action or
delays connected with the disposition of the underlying obligations. Further, it
is uncertain whether a Fund would be entitled, as against a claim by such seller
or its receiver or trustee in bankruptcy, to retain the underlying securities.
Reverse repurchase agreements involve the risk that the market value of the
securities held by a Fund may decline below the price of the securities it is
obligated to repurchase.
Investments include 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 S&P,
"Prime-2" or better by Moody's, "F-2" or better by Fitch, "Duff 2" or better
by Duff or, determined by the adviser to be of comparable quality pursuant to
guidelines approved by the Trust's Board of Trustees. In addition, the
International Equity, Small Cap Growth, Tax Managed Equity, Core Equity,
Balanced Allocation, Total Return Advantage, Intermediate Bond and Enhanced
Income Funds may invest in Canadian Commercial Paper (CCP), which is
commercial paper issued by a Canadian corporation or a Canadian counterpart
of a U.S. corporation, and in Europaper, which is U.S. dollar denominated
commercial paper of a foreign issuer. Each Fund 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.
Bank obligations include bankers' acceptances and negotiable
certificates of deposit, and non-negotiable demand and time deposits issued for
a definite period of time and earning a specified return by a U.S. bank which is
a member of the Federal Reserve System. Bank obligations also include U.S.
dollar denominated bankers' acceptances and 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
International Equity, Small Cap Growth, Tax Managed Equity, Core Equity,
Balanced Allocation, Total Return Advantage, Intermediate Bond and Enhanced
Income Funds may also make interest bearing savings deposits in commercial and
savings banks
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not in excess of 5% of its total assets. Investment in non-negotiable time
deposits is limited to no more than 5% of the Fund's total assets at the time of
purchase.
The Balanced Allocation, Total Return Advantage, Intermediate Bond
and Enhanced Income Funds may also make limited investments in (GIC) issued
by U.S. insurance companies. When investing in GICs, a Fund makes cash
contributions to a deposit fund or an insurance company's general account.
The insurance company then credits to that Fund monthly a guaranteed minimum
interest which is based on an index. The insurance company may assess
periodic charges against a GIC for expense and service costs allocable to it,
and the charges will be deducted from the value of the deposit fund. A Fund
will purchase a GIC only when its Adviser or Sub-adviser has determined,
under guidelines established by the Board of Trustees, that the GIC presents
minimal credit risks to the Fund and is of comparable quality to instruments
that are rated high quality by one or more rating agencies. In the case of
the Balanced Allocation Fund, because the Fund may not receive the principal
amount of a GIC from the insurance company on sixty 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 15%
of the Fund's net assets.
The Mid Cap Growth Fund may hold temporary cash balances which may be
invested in various short-term obligations (with maturities of 12 months or
less) such as domestic and foreign commercial paper, bankers' acceptances,
certificates of deposit and demand and time deposits of domestic and foreign
branches of U.S. banks and foreign banks, U.S. government securities, repurchase
agreements, reverse repurchase agreements and GICs.
The Balanced Allocation and U.S. Government Income Funds may engage
in short-term trading and may sell securities which have been held for
periods ranging from several months to less than a day. The object of such
short-term trading is to increase the potential for capital appreciation
and/or income by making portfolio changes in anticipation of expected
movements in interest rates or security prices or in order to take advantage
of what the Fund's Adviser believes is a temporary disparity in the normal
yield relationship between two securities. Any such trading would increase
the Fund's turnover rate and its transaction costs. Higher portfolio turnover
may result in increased taxable gains to shareholders (see "Additional
Information Concerning Taxes" below) and increased expenses paid by the Fund
due to transaction costs. Under normal market conditions, the Balanced
Allocation and U.S. Government Income's portfolio turnover are not expected
to exceed 200%.
MONEY MARKET INSTRUMENTS
The Money Market Fund may invest in "money market" instruments,
including bank obligations and commercial paper. The Ohio Municipal Money Market
and Pennsylvania Tax Exempt 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
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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 S&P,
"Prime-2" or better by Moody's, "F-2" or better by Fitch "Duff 2" or by Duff
or, if not rated, 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 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 SECURITIES
The Treasury Money Market and Treasury Plus Money Market Funds may
only invest in direct obligations of the U.S. Treasury and investment companies
that invest only in such obligations. Examples of the types of U.S. government
obligations that may be held by the Balanced Allocation, Total Return Advantage,
Bond, Intermediate Bond, GNMA, Enhanced
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Income, Ohio Municipal Money Market, Pennsylvania Tax Exempt Money Market,
Tax Exempt Money Market, Money Market, Government Money Market, Mid Cap
Growth, U.S. Government Income, and Michigan Municipal Bond Funds include, in
addition to Treasury Bills, the obligations of Federal Home Loan Banks,
Federal 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. Some of these investments may be variable or floating rate
instruments. See "Variable and Floating Rate Obligations." The Ohio Municipal
Money Market, Pennsylvania Tax Exempt Money Market, Tax Exempt Money Market,
Money Market and Government Money Market 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.
U.S. TREASURY OBLIGATIONS AND RECEIPTS
The Balanced Allocation, Total Return Advantage, Bond, Intermediate
Bond, GNMA, Enhanced Income, Money Market, Mid Cap Growth, U.S. Government
Income and Michigan Municipal Bond Funds may invest in obligations issued or
guaranteed by the U.S. government or its agencies. The Fund may invest in U.S.
Treasury obligations consisting of bills, notes and bonds issued by the U.S.
Treasury, and separately traded interest and principal component parts of such
obligations that are transferable through the Federal book-entry system known as
STRIPS (Separately Traded Registered Interest and Principal Securities).
The Fund may invest in separately traded interest and principal
component parts of the U.S. Treasury obligations that are issued by banks or
brokerage firms and are created by depositing U.S. Treasury obligations into a
special account at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
of receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts include
Treasury Receipts (TRs), Treasury Investment Growth Receipts (TIGRs),
Liquid Yield Option Notes (LYONs), and Certificates of Accrual on Treasury
Securities (CATS). TIGRs, LYONs and CATS are interests in private proprietary
accounts while TR's are interests in accounts sponsored by the U.S. Treasury.
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Securities denominated as TRs, TIGRs, LYONs and CATS are sold as zero
coupon securities which means that they are sold at a substantial discount and
redeemed at face value at their maturity date without interim cash payments of
interest or principal. This discount is accreted over the life of the security,
and such accretion will constitute the income earned on the security for both
accounting and tax purposes. Because of these features, such securities may be
subject to greater interest rate volatility than interest paying investments.
PRIVATE ACTIVITY BONDS
The Michigan Municipal Bond Fund may invest in private activity
bonds. It should be noted that the Tax Reform Act of 1986 substantially revised
provisions of prior federal law affecting the issuance and use of proceeds of
certain tax-exempt obligations. A new definition of private activity bonds
applies to many types of bonds, including those which were industrial
development bonds under prior law. Any reference herein to private activity
bonds includes industrial development bonds. Interest on private activity bonds
is tax-exempt (and such bonds will be considered municipal securities for
purposes of this Prospectus) only if the bonds fall within certain defined
categories of qualified private activity bonds and meet the requirements
specified in those respective categories. If the Fund invests in private
activity bonds which fall outside these categories, shareholders may become
subject to the federal alternative minimum tax on that part of the Fund's
distributions derived from interest on such bonds. The Tax Reform Act generally
did not change the federal tax treatment of bonds issued to finance government
operations. For further information relating to the types of private activity
bonds which will be included in income subject to the federal alternative
minimum tax.
STAND-BY COMMITMENTS
The Ohio Tax Exempt Bond, Pennsylvania Municipal Bond, National Tax
Exempt Bond and Michigan Municipal Bond Funds may acquire stand-by
commitments with respect to Municipal Securities (defined below) held in its
portfolio. The Tax-Exempt Funds, Ohio Municipal Money Market, Pennsylvania
Tax Exempt Money Market, and Tax Exempt Money Market Funds may acquire
stand-by commitments. Under a stand-by commitment, a dealer agrees to
purchase at a Fund's option specified Michigan Municipal Securities at a
specified price. Stand-by commitments acquired by the Fund must be of high
quality as determined by any Rating Agency, or, if not rated, must be of
comparable quality as determined by the Adviser. The Fund acquires stand-by
commitments solely to facilitate portfolio liquidity and does not intend to
exercise its rights thereunder for trading purposes.
DERIVATIVE INSTRUMENTS
The International Equity, Small Cap Value, Small Cap Growth, Equity
Growth, Tax Managed Equity, Core Equity, Equity Index, Equity Income, Balanced
Allocation, Total Return Advantage, Bond, Intermediate Bond, GNMA, Enhanced
Income, Money Market, Mid Cap Growth, and U.S. Government Income Funds may
purchase certain "derivative" instruments. Derivative instruments are
instruments that derive value from the performance of underlying securities,
interest or currency exchange rates, or indices, and include (but are not
limited to) futures contracts, options, forward currency contracts and
structured debt obligations
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(including collateralized mortgage obligations ("CMOs"), various floating rate
instruments and other types of securities).
Like all investments, derivative instruments involve several basic
types of risks which must be managed in order to meet investment objectives. The
specific risks presented by derivatives include, to varying degrees, market risk
in the form of underperformance of the underlying securities, exchange rates or
indices; credit risk that the dealer or other counterparty to the transaction
will fail to pay its obligations; volatility and leveraging risk that, if
interest or exchange rates change adversely, the value of the derivative
instrument will decline more than the securities, rates or indices on which it
is based; liquidity risk that the Fund will be unable to sell a derivative
instrument when it wants because of lack of market depth or market disruption;
pricing risk that the value of a derivative instrument (such as an option) will
not correlate exactly to the value of the underlying securities, rates or
indices on which it is based; extension risk that the expected duration of an
instrument may increase or decrease; and operations risk that loss will occur as
a result of inadequate systems and controls, human error or otherwise. Some
derivative instruments are more complex than others, and for those instruments
that have been developed recently, data are lacking regarding their actual
performance over complete market cycles.
The risk to the International Equity, Small Cap Value, Small Cap
Growth, Equity Growth, Tax Managed Equity, Core Equity, Equity Index, Equity
Income, Mid Cap Growth and U.S. Government Income Funds due to the use of
derivatives in the equity portion of the Fund's portfolio of investments will be
limited to 10% of such investments at the time of the derivative transaction.
With respect to the fixed income portion of the Fund's investments,
the Fund's Adviser has determined that the risk features that most distinguish
derivatives from other investment instruments (and which heavily influence the
market, volatility and leveraging, liquidity, and pricing risks referred to
above) can be described generally as "structural risk." Structural risk refers
to the contractual features of an investment that can cause its total return to
vary with changes in interest rates or other variables. Structural risk is not
unique to derivatives, but because derivatives often are created through the
intricate division of the cash flows of the underlying security, they can (but
do not necessarily) present a high degree of structural risk. Structural risk
can arise from variations in coupon levels, principal, and/or average life.
The Adviser has adopted the following internal policies concerning
management of the structural risk inherent in derivative instruments in the
fixed income portion of the Fund's portfolio. The risk to the Fund due to the
use of such derivatives will be limited to the principal invested in such
instruments. When the Fund engages in short sales "against the box," risk of
loss will be limited to the value of the securities "in the box." The adviser
does NOT presently intend to invest in the following types of derivatives which
are structured instruments, such as range notes, dual index notes, leveraged or
deleveraged bonds, inverse floaters, index amortizing notes and other structured
instruments having similar cash flow characteristics.
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The cash equivalent portion of the Fund's portfolio of investments is
managed with an 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
with respect to this portion of the Fund's assets.
The following types of derivative instruments ARE NOT permitted
investments for the cash equivalent portion of the Fund's portfolio of
investments:
- 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 cash equivalent portion of the Fund's portfolio will not be
invested 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 the cash equivalent portion of the Fund's
portfolio are:
- securities based on short-term, fixed-rate contracts; and
- 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 Fund due to the use of derivatives in the cash
equivalent portion of its assets will be limited to the principal invested in
such instruments.
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The Adviser will evaluate the risks presented by the derivative
instruments purchased by the Fund, and will determine, in connection with
day-to-day management of the Fund, how they will be used in furtherance of the
Fund's investment objective.
The Intermediate Bond Fund may invest in moderate structural risk
derivatives containing features which can modestly or moderately alter the
timing and/or amount of principal return and/or amount of income return. This
would include, for example, investments that are subject to normal prepayment
variances experienced in mortgage pass-through securities. Periodic occurrence
of this degree of structural risk would not be expected to materially impact
overall Fund returns relative to its investment objective.
The Intermediate Bond Fund will NOT invest in high structural risk
derivatives whose duration (and hence return) can vary widely depending on moves
in interest rates or other contractual variables. Generally, these are
instruments which are deemed to have a high sensitivity to changes in interest
rates, which could materially alter the effective duration or coupon and return
of the instruments.
The Intermediate Bond Fund may invest in mortgage-backed derivative
securities, including CMOs, provided that they are not identified by the
advisers as "high risk securities" by certain quantitative tests that are
generally accepted standards in the investment industry.
Other derivative instruments that are suitable for investment include:
asset-backed securities such as those backed by automobile loans or credit card
receivables. All such securities, however, must conform to the structural risk
standards stated above (i.e. not present high structural risk).
The Adviser does NOT presently intend to invest in the following types
of derivatives on behalf of the Fund:
- - exchange rate-related securities
- - forward currency exchange contracts
- - interest rate swaps
- - futures contracts and related options
- - structured instruments, such as range notes, dual index notes, leveraged or
deleveraged bonds, inverse floaters, index amortizing notes and other
structured instruments having similar cash flow characteristics.
The Total Return Advantage and Enhanced Income Funds may invest in
derivative instruments having either moderate structural risk or high structural
risk characteristics (as described above in the section pertaining to the
Intermediate Bond Fund). There are no policy restrictions on specific types of
derivative instruments in which the Funds are permitted to invest.
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However, structural risk is controlled by adherence to specific overall Fund
parameters. The Funds are managed in accordance with a policy goal that
constrains the potential variability of overall Fund duration and total return
in relation to specified investment performance benchmarks. Fund exposure to
derivative instruments having high structural risk characteristics is targeted
at a maximum of 5.0% of each Fund's net assets with no individual position
greater than 1.0% of each Fund. Variability in total Fund duration caused by
these securities is targeted not to exceed 0.1 years in any one calendar year.
The Adviser of the Bond Fund does NOT presently intend to invest in
the following types of derivatives which are structured instruments, such as
range notes, dual index notes, leveraged or deleveraged bonds, inverse floaters,
index amortizing notes and other structured instruments having similar cash flow
characteristics.
The Adviser has adopted the following internal policy concerning management
of the structural risk inherent in derivative instruments on behalf of the GNMA
Fund:
The Adviser does not presently intend to invest in the following types
of derivatives on behalf of the GNMA Fund:
- - exchange rate-related securities
- - forward currency exchange contracts
- - structured instruments, such as range notes, dual index notes, leveraged or
deleveraged bonds, inverse floaters, index amortizing notes and other
structured instruments having similar cash flow characteristics
TAX-EXEMPT DERIVATIVES AND OTHER MUNICIPAL SECURITIES
The Ohio Municipal Money Market, Pennsylvania Tax Exempt Money
Market and Tax Exempt 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 "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 Ohio
Municipal Money Market, Pennsylvania Tax Exempt Money Market and Tax Exempt
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.
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SECURITIES OF OTHER INVESTMENT COMPANIES
Subject to 1940 Act limitations and pursuant to applicable SEC
requirements, the Funds 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. As a shareholder of another investment company, the Fund
would bear, along with other shareholders, its pro rata portion of that
company's expenses, including advisory fees. These expenses would be in addition
to the advisory and other expenses that the Fund bears directly in connection
with its own operations. Investment companies in which the Fund may invest may
also impose a sales or distribution charge in connection with the purchase or
redemption of their shares and other types of commissions or charges. Such
charges will be payable by a Fund and, therefore, will be borne indirectly by
its shareholders.
Each Fund may invest in securities issued by other investment
companies as described in the Prospectus. Each Fund currently intends to limit
its investments in securities issued by other investment companies so that, as
determined immediately after a purchase of such securities is made: (i) not more
than 5% of the value of the Fund's total assets will be invested in the
securities of any one investment company; (ii) not more than 10% of the value of
its total assets will be invested in the aggregate in securities of investment
companies as a group; and (iii) not more than 3% of the outstanding voting stock
of any one investment company will be owned by the Fund or by the Trust as a
whole.
With regard to the Tax-Exempt Funds and the Money Market Funds, 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.
In addition, the International Equity Fund may purchase shares of
investment companies investing primarily in foreign securities, including
"country funds" which have portfolios consisting exclusively of securities of
issuers located in one foreign country. Such "country funds" may be either
open-end or closed-end investment companies, and may include a portfolio or
portfolios of The CountryBaskets Index Fund, Inc. (CountryBaskets), a
registered, open-end management investment company that, through its portfolios,
seeks to provide investment results that substantially correspond to the price
and yield performance of a broad-based index of publicly traded equity
securities in a particular country, geographic region or industry sector.
The International Equity Fund may also purchase World Equity Benchmark
Shares issued by The Foreign Fund, Inc. (WEBS) and similar securities of other
issuers. WEBS are shares of an investment company that invests substantially all
of its assets in securities included in the Morgan Stanley Capital International
indices for specific countries. Because the expense associated with an
investment in WEBS can be substantially lower than the expense of small
investments directly in the securities comprising the indices it seeks to track,
the Adviser believes that investments in WEBS of countries that are included in
the EAFE Index can provide a cost-effective means of diversifying the Fund's
assets across a broader range of equity securities.
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WEBS are listed on the American Stock Exchange (AMEX), and were
initially offered to the public in 1996. The market prices of WEBS are expected
to fluctuate in accordance with both changes in the net asset values of their
underlying indices and supply and demand of WEBS on the AMEX. To date, WEBS have
traded at relatively modest discounts and premiums to their net asset values.
However, WEBS have a limited operating history, and information is lacking
regarding the actual performance and trading liquidity of WEBS for extended
periods or over complete market cycles. In addition, there is no assurance that
the requirements of the AMEX necessary to maintain the listing of WEBS will
continue to be met or will remain unchanged.
In the event substantial market or other disruptions affecting WEBS or
CountryBaskets should occur in the future, the liquidity and value of the
International Equity Fund's shares could also be substantially and adversely
affected, and the Fund's ability to provide investment results approximating the
performance of securities in the EAFE could be impaired. If such disruptions
were to occur, the Fund could be required to reconsider the use of WEBS,
CountryBaskets or other "country funds" as part of its investment strategy.
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 charges will be payable
by the Fund and, therefore, will be borne indirectly by its shareholders.
MUNICIPAL SECURITIES
The Ohio Tax-Exempt, Bond, Pennsylvania Municipal Bond, National
Tax Exempt Bond and Michigan Municipal Bond Funds may invest in 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 Bonds 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, 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.
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Municipal Securities that are payable only from the revenues
derived from a particular facility may be adversely affected by federal or
state laws, regulations or court decisions which make it more difficult for
the particular facility to generate revenues sufficient to pay such interest
and principal, including, among others, laws, decisions 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. Municipal Securities, the payment of interest and
principal on which is insured in whole or in part by a governmentally created
fund, may be adversely affected by 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, the payment of
interest and principal on Municipal Securities may be adversely affected by
respective state laws which limit the availability of remedies or the scope
of remedies available in the event of a default on such municipal securities.
Because of the diverse nature of such laws and regulations and the
impossibility of either predicting in which specific Municipal Securities the
Funds will invest from time to time or predicting the nature or extent of
future judicial interpretations or 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, regulations and
judicial interpretations on the securities in which the Funds may invest and,
therefore, on the shares of the 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, the 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 a 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
the Funds. The Funds' adviser will consider such an event in determining whether
they should continue to hold the obligation.
The payment of principal and interest on most Municipal Securities
purchased by the 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 or the principal of its Municipal Securities may be
materially adversely affected by litigation or other conditions.
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Certain Municipal Securities held by the 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 or original purchaser
of the Municipal Securities at the time of their original issuance. In the event
that the issuer defaults on interest or principal payments, the insurer of the
obligation 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 Funds may invest include, but are not
limited to, general obligation notes, tax anticipation notes (notes sold to
finance working capital or capital facilities 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.
The Funds invest in Municipal Securities which at the time of purchase
are rated the following or higher: "BBB" by S&P or Fitch, "Baa" by Moody's, or
"A" by Duff in the case of bonds; "SP-2" by S&P, "F-2" by Fitch, "Duff 2" by
Duff, or "MIG-2" ("VMIG-2" for variable rate demand notes) by Moody's in the
case of notes; or "A-2" by S&P, "F-2" by Fitch, "Duff 2" by Duff, Baa or
"Prime-2" by Moody's in the case of tax-exempt commercial paper.
Securities that are unrated at the time of purchase will be determined
to be of comparable quality by the Funds' adviser pursuant to guidelines
approved by the Trust's Board of Trustees. If the rating of an obligation held
by a Fund is reduced below its rating requirements, the Fund will sell the
obligation when the adviser believes that it is in the best interests of the
Fund to do so. The applicable ratings are more fully described in the
Appendix.
SPECIAL CONSIDERATIONS REGARDING INVESTMENT IN OHIO MUNICIPAL SECURITIES
As described in the Prospectus, the Ohio Tax Exempt Bond 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 Ohio Tax Exempt
Bond 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.
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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.
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 1997 is 11,186,000.
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
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, in
recent years the State rates were below the national rates (4.3% versus 4.5% in
1998). 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 Ohio Tax Exempt Bond 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 continuing most other appropriations for a month.
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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 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 instructional materials and a distance learning
program, and $34 million to the BSF and the $263 million balance to a State
income tax reduction fund.
The GRF appropriations act for the 1998-99 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 (and are included in
the pending House and Senate-passed appropriation bills for FY 2000-01).
Subsequent legislation increased the FY 1999 GRF appropriation level for
elementary and secondary education, with the increase funded in part by mandated
small percentage reductions in
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State appropriations for various State agencies and institutions. Expressly
exempt from those reductions are all appropriations for debt service, including
lease rental payments.
The BSF had a June 8, 1999 balance of more than $906 million.
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 15 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 8, 1999, almost $1.14 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 ($23.9 million outstanding); (b)
$240 million of obligations previously authorized for local infrastructure
improvements, no more than $120 million of which may be issued in any calendar
year (over $1 billion 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 ($112.7 million outstanding or awaiting delivery,
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
million outstanding authorization, and authorizes not more than $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 $5.2 billion of
which were outstanding at June 8, 1999.
The General Assembly has placed on the November 1999 general election
ballot a proposed constitutional amendment relating to State debt. If approved
by the voters, it will authorize State general obligation debt to pay costs of
facilities for a system of common schools throughout the State and facilities
for state supported and assisted institutions of higher education. That, and
other debt represented by direct obligations of the State (such as that
authorized by the Ohio Public Facilities Commission and Ohio Building Authority,
and some authorized by the Treasurer), may not be issued if future FY total debt
service on those direct obligations to be paid
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from the GRF or net lottery proceeds exceeds 5% of total estimated revenues of
the State for the GRF and from net State lottery proceeds during the FY of
issuance.
Aggregate FY 1998 rental payments under various capital lease and
lease purchase agreements were 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 8, 1999)
to be approximately $25.8 million (of which $22 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 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 46% in recent years) of their operating moneys from
State subsidies, but are dependent on local property taxes, and in 123 districts
(as of June 8, 1999) 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 referred to below) are
unconstitutional, and ordered the State to provide for and fund a system
complying with the Ohio Constitution, staying its order to permit time for
responsive corrective actions. After a further hearing, the trial court has
decided that steps taken to date by the State to enhance school funding have not
met the requirements of the Supreme Court decision; the State has filed a notice
of appeal with the Supreme Court, and that Court has issued a stay, pending
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appeal, of the implementation of the trial court's order. 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
totaled $71.1 million for 29 districts in FY 1995 (including $29.5 million for
one), $87.2 million for 20 districts in FY 1996 (including $42.1 million for
one), $113.2 million for 12 districts in FY 1997 (including $90 million to one
for restructuring its prior loans), and $23.4 million for 10 districts in FY
1998.
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 26 cities and villages; for 20 of them the fiscal situation was
resolved and the procedures terminated (one city is in preliminary "fiscal
watch" status). As of June 8, 1999, a school district "fiscal emergency"
provision was applied to nine districts, and ten were on preliminary "fiscal
watch" status.
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.
SPECIAL RISK CONSIDERATIONS REGARDING INVESTMENT IN PENNSYLVANIA SECURITIES
Potential shareholders should consider the fact that the Pennsylvania
Tax Exempt Bond Fund's portfolio consists primarily of securities issued by the
Commonwealth of Pennsylvania (the "Commonwealth"), its municipalities and
authorities and should realize that the 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 decreases have resulted in surpluses the last six years;
as of June 30, 1998, the General Fund had a surplus of $1,364.9 million.
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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 as of June 1, 1999, suits relating to the following
matters: (i) In February 1999, a taxpayer filed a petition for review in the
Commonwealth Court of Pennsylvania asking the court to declare that Chapter 5
(relating to Sports Facilities Financing) of the Capital Facilities Debt
Enabling Act is in violation of the Pennsylvania Constitution. Commonwealth
Court denied the taxpayer's motion for a preliminary injunction and the Supreme
Court denied an appeal of such denial. The respondents have filed preliminary
objections in the nature of a demurrer, requesting the Court dismiss the case
with prejudice. Oral arguments before the Commonwealth Court regarding the
preliminary objections were scheduled for May 19, 1999, (ii) 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. In July 1998, a settlement agreement was
reached with the City of Philadelphia. The Commonwealth has agreed to pay
$100,000 to settle plaintiffs' $1.4 million claim for attorney's fees and to
take other actions in exchange for a full and final release and dismissal of the
case against the Commonwealth parties. The settlement was approved by the
district court on February 1, 1999, and the case was dismissed; (iii) In 1987,
the Supreme Court of Pennsylvania held the statutory scheme for county 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, consisting of the
special master and representatives of the Executive and Legislative branches, to
develop an implementation plan; an implementation plan was filed in July 1997.
In April 1998 the General Assembly appropriated approximately $12 million for
the funding of county court administrator, under the implementation plan.
However, no legislation has been approved for the payment of Commonwealth
compensation county court administrators. In May 1998, an action was filed by
the Administrative Governing Board of the First Judicial District claiming the
city government has failed to provide adequate Funds for the Operation of the
courts
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of the First Judicial District. In November 1998, the First Judicial
District Governing Board filed with the Supreme Court a renewed motion for entry
of an order providing emergency relief, which requests the City of Philadelphia
to provide funds to the First Judicial District Courts, in order to maintain
necessary judicial operations throughout the end of the fiscal year. Although
the Supreme Court issued no order, the City is apparently continuing its funding
of the courts; (iv) 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; On July 9, 1998 the state court issued an opinion dismissing the
petitioners' claim in its entirety. On July 20, 1998 the petitioner filed a
timely motion for post-trial relief, taking exception to the state court's
findings of fact and conclusions of law. The Supreme Court, after assuming
jurisdiction in the case directed that all parties submit briefs on all issues
presented in the petitioners' motion for post-trial relief; 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. The Supreme Court heard oral argument on the issues in February
1998 but no decision has been issued, (vi) In February 1997, five residents of
the City of Philadelphia, joined by the City, the School District and others,
filed a civil action in the Commonwealth Court for declaratory judgment against
the Commonwealth and certain Commonwealth officers and officials that the
defendants had failed to provide an adequate quality of education in
Philadelphia, as required by the Pennsylvania Constitution. In March 1998, the
Commonwealth Court dismissed the case on the grounds that the issues prescribed
are not justifiable. An appeal to the Supreme Court of Pennsylvania is pending,
(vii) In April 1995, the Commonwealth reached a settlement agreement with
Fidelity Bank and certain other banks with respect to the constitutional
validity of the Amended Bank Shares Act and related legislation; although this
settlement agreement did not require expenditure of Commonwealth funds, the
petitions of other banks are currently pending with the Commonwealth Court; In
January 1998 a panel of the Commonwealth Court ruled in favor of the
Commonwealth, finding no constitutional violation. Royal Bank filed exceptions,
which the Commonwealth Court EN BANC denied. Royal Bank appealed to the Supreme
Court and briefing has been completed. The Court has not yet scheduled oral
arguments. (viii) Suit has been filed in state court against the State
Employees' Retirement Board claiming that the use of gender district actuarial
factors to compute benefits received before August 1, 1983 violates the
Pennsylvania Constitution (gender-neutral factors have been used since August 1,
1983, the date on which the U.S. Supreme Court held in ARIZONA GOVERNING
COMMITTEE V. NORRIS that the use of such factors violated the Federal
Constitution); in 1996, the Commonwealth Court heard oral argument EN BLANC, and
in 1997 denied the plaintiff's motion for judgement on the pleading. The case is
currently in discovery. (ix) In March 1997, Rite Aid of Pennsylvania, Inc. filed
in the United States District Court for the Eastern District of Pennsylvania, a
civil action against the Secretary of Public Welfare alleging that regulations
promulgated in October 1995 governing payment
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rates for prescription drugs and related services provided to recipients of
benefits under the Pennsylvania Medical Assistance Program violated provisions
of Title XIX of the Social Security Act and regulations of the U.S. Department
of Health and Human Services, as well as provisions of State law and Federal
constitutional due process. In August 1998, the court declared that certain
pharmacy reimbursement rates were in violation of the Medicaid Act and enjoined
the Secretary from using these rates to reimburse for any prescription drugs and
related services provided to Medicaid recipients on and after October 1, 1998.
The Secretary filed motions for appeal and in March 1999, the U.S. Court of
Appeals for the Third Circuit reversed the district court's order and remanded
the case for further proceedings. The plaintiffs on April 5, 1999 filed an
application for rehearing. (x) On March 9, 1998 several residents of the City of
Philadelphia along with the School District of Philadelphia and others brought
suit in the United States District Court for the Eastern District of
Pennsylvania against the Governor, the Secretary of Education and others
alleging that the defendants are violating a regulation of the U.S. Department
of Education promulgated under Title VI of the Civil Rights Act of 1964 in that
the Commonwealth's system for funding public schools has the effect of
discrimination on the basis of race. On November 18, 1998, the district court
dismissed the action with prejudice. An appeal by the plaintiffs was filed and
the parties are awaiting the scheduling of oral argument.
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 A3
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 Baa2 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, 1998 was a surplus of $169.2 million.
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 1996. 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. PICA had approximately $1.1
billion in special revenue bonds outstanding as of April 15, 1999.
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SPECIAL CONSIDERATIONS REGARDING INVESTMENT IN MICHIGAN MUNICIPAL
SECURITIES. The following information is drawn from various Michigan
governmental publications, particularly the Governor's Executive Budget for
fiscal year 1999-2000, and from official statements relating to securities
offerings of the State and its political subdivisions. While the Trust has not
independently verified such information, it has no reason to believe that it is
not correct in all material respects.
The State of Michigan's economy is principally dependent on
manufacturing (particularly automobiles, office equipment and other durable
goods), tourism and agriculture, and historically has been highly cyclical.
Total State wage and salary employment is estimated to have grown by
1.9% in 1998. The rate of unemployment is estimated to have been 3.8% in 1998,
below the national average for the fifth consecutive year. Personal income grew
at an estimated 5.1% annual rate in 1998, up from the 4.6% growth reported for
1997.
During the past five years, improvements in the Michigan economy have
resulted in increased revenue collections which, together with restraints on the
expenditure side of the budget, have resulted in State General Fund budget
surpluses, most of which were transferred to the State's Counter-Cyclical Budget
and Economic Stabilization Fund. The balance of that Fund as of September 30,
1998 is estimated to have been in excess of $1.1 billion.
The Michigan Constitution limits the amount of total State revenues
that can be raised from taxes and certain other sources. State revenues
(excluding federal aid and revenues for payment of principal and interest on
general obligation bonds) in any fiscal year are limited to a fixed percentage
of State personal income in the prior calendar year or the average of the prior
three calendar years, whichever is greater, and this fixed percentage equals the
percentage of the 1978-79 fiscal year state government revenues to total
calendar year 1977 State personal income (which was 9.49%).
The Michigan Constitution also provides that the proportion of State
spending paid to all units of local government to total State spending may not
be reduced below the proportion in effect in the 1978-79 fiscal year. The State
originally determined that portion to be 41.6%. If such spending does not meet
the required level in a given year, an additional appropriation for local
governmental units is required by the following fiscal year; which means the
year following the determinations of the shortfall, according to an opinion
issued by the State's Attorney General. Spending for local units met this
requirement for fiscal years 1986-87 through 1991-92. As the result of
litigation, the State agreed to reclassify certain expenditures, beginning with
fiscal year 1992-93, and has recalculated the required percentage of spending
paid to local government units to be 48.97%.
The State has issued and has outstanding general obligation full faith
and credit bonds for Water Resources, Environmental Protection Program,
Recreation Program and School Loan purposes. As of September 30, 1998, the State
had approximately $874 million of general obligation bonds outstanding.
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The State may issue notes or bonds without voter approval for the
purposes of making loans to school districts. The proceeds of such notes or
bonds are deposited in the School Bond Loan Fund maintained by the State
Treasurer and used to make loans to school districts for payment of debt on
qualified general obligation bonds issued by local school districts.
The State is a party to various legal proceedings seeking damages or
injunctive or other relief. In addition to routine litigation, certain of these
proceedings could, if unfavorably resolved from the point of view of the State,
substantially affect State programs or finances. As of early 1998, these
lawsuits involved programs generally in the areas of corrections, tax
collection, commerce, and proceedings involving budgetary reductions to school
districts and governmental units, and court funding. Notable among these legal
proceedings are lawsuits brought by a number of school districts challenging the
constitutionality of certain state-mandated special education services without
corresponding state funding.
The State Constitution limits the extent to which municipalities or
political subdivisions may levy taxes upon real and personal property through a
process that regulates assessments.
On March 15, 1994, Michigan voters approved a property tax and school
finance reform measure commonly known as Proposal A. Under Proposal A, as
approved, effective May 1, 1994, the State sales and use tax increased from 4%
to 6%, the State income tax decreased from 4.6% to 4.4%, the cigarette tax
increased from $.25 to $.75 per pack and an additional tax of 16% of the
wholesale price began to be imposed on certain other tobacco products. A .75%
real estate transfer tax became effective January 1, 1995. Beginning in 1994, a
state property tax of 6 mills began to be imposed on all real and personal
property currently subject to the general property tax. All local school boards
are authorized, with voter approval, to levy up to the lesser of 18 mills or the
number of mills levied in 1993 for school operating purposes on nonhomestead
property and nonqualified agricultural property. Proposal A contains additional
provisions regarding the ability of local school districts to levy taxes, as
well as a limit on assessment increases for each parcel of property, beginning
in 1995. Such increases for each parcel of property are limited to the lesser of
5% or the rate of inflation. When property is subsequently sold, its assessed
value will revert to the current assessment level of 50% of true cash value.
Under Proposal A, much of the additional revenue generated by the new taxes will
be dedicated to the State School Aid Fund.
Proposal A and its implementing legislation shifted significant
portions of the cost of local school operations from local school districts to
the State and raised additional State revenues to fund these additional State
expenses. These additional revenues will be included within the State's
constitutional revenue limitations and may impact the State's ability to raise
additional revenues in the future.
A state economy during a recessionary cycle would also, as a separate
matter, adversely affect the capacity of users of facilities constructed or
acquired through the proceeds of private
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activity bonds or other "revenue" securities to make periodic payments for the
use of those facilities.
OTHER TAX-EXEMPT INSTRUMENTS
Investments by the Ohio Tax Exempt Bond, Pennsylvania Municipal
Bond and National Tax Exempt Bond Funds, Ohio Municipal Money Market,
Pennsylvania Tax Exempt Money Market and Tax Exempt Money Market Funds in
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.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the year by the
monthly average value of the portfolio securities. The calculation excludes U.S.
Government securities and all securities whose maturities at the time of
acquisition were one year or less. Portfolio turnover may vary greatly from year
to year as well as within a particular year, and may also be affected by cash
requirements for redemptions of shares and by requirements which enable the
Trust to receive certain favorable tax treatment. Portfolio turnover will not be
a limiting factor in making decisions.
The annual portfolio turnover rate for the International Equity, Small
Cap Value, Small Cap Growth, Equity Growth, Core Equity and Equity Income Funds
is not expected to exceed 100% under normal market conditions. Portfolio
turnover for the Tax Managed Equity and Equity Index Funds is not expected to
exceed 25% and 10%, respectively, under normal market conditions. The annual
portfolio turnover rate is not expected to exceed 100%, 200% and 100% for the
Mid Cap Growth, U.S. Government Income and Michigan Tax Exempt Bond Funds,
respectively, under normal market conditions. The annual rate for the Total
Return Advantage, Intermediate Term Bond, GNMA, and Enhanced Income Funds is not
expected to exceed 100% under normal market conditions. Annual portfolio
turnover for the Treasury Plus Money Market Fund is expected to be zero percent
for regulatory purposes.
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INVESTMENT LIMITATIONS
Each Fund is subject to a number of investment limitations. The
following investment limitations are matters of fundamental policy and may not
be changed with respect to a particular Fund without the affirmative vote of the
holders of a majority of the Fund's outstanding shares.
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;
(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;
(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.
In addition, the National Tax Exempt Fund may not purchase securities
of any one issuer, other than securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities if, immediately after such
purchase, more than 5% of the value of the Fund's total assets would be invested
in such issuer or the Fund would hold more than 10% of any class of securities
of the issuer or more than 10% of the outstanding voting securities of the
issuer, except that up to 25% of the value of the Fund's total assets may be
invested without regard to such limitations.
The Equity, Balanced Allocation and Fixed Income Funds may not
purchase securities of any one issuer, other than securities issued or
guaranteed by the U.S. government or
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its agencies or instrumentalities or, in the case of the International Equity
Fund, securities issued or guaranteed by any foreign government, if, immediately
after such purchase, more than 5% of the value of the Fund's total assets would
be invested in such issuer or the Fund would hold more than 10% of any class of
securities of the issuer or more than 10% of the outstanding voting securities
of the issuer, except that up to 25% of the value of the Fund's total assets may
be invested without regard to such limitations.
For purposes of the above investment limitations, a security is
considered to be issued by the governmental entity (or entities) whose assets
and revenues back the security, or, with respect to a private activity bond that
is backed only by the assets and revenues of a nongovernmental user, a security
is considered to be issued by such nongovernmental user.
Except for the Funds' policy on illiquid securities and borrowing, 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.
Opinions relating to the validity of Municipal Securities and to the
exemption of interest thereon from federal and state income taxes are rendered
by qualified legal counsel to the respective issuers at the time of issuance.
Neither the Funds nor their adviser will review the proceedings relating to the
issuance of Municipal Securities or the basis for such opinions.
In addition to the investment limitations disclosed above, 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 the Fund may: (a) purchase and sell options,
forward contracts, futures contracts, including without limitation, those
relating to indices; (b) purchase and sell options on futures contracts or
indices; (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 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
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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 15% (10% in the case of the Money Market Funds) of
its net assets in illiquid securities.
6. Purchase securities while its outstanding borrowings (including
reverse repurchase agreements) are in excess of 5% of its total assets.
Securities held in escrow or in separate accounts in connection with a Fund's
investment practices described in its Prospectus or Statement of Additional
Information are not deemed to be pledged for purposes of this limitation.
With respect to each of the Ohio Tax Exempt and Pennsylvania Tax
Exempt Bond Funds, at the end of each quarter of its taxable year, (i) at least
50% of the market value of its total assets will be invested in cash, U.S.
Government securities, securities of other regulated investment companies and
other securities, with such other securities of any one issuer limited for the
purposes of this calculation to an amount not greater than 5% of the value of
its total assets and 10% of the outstanding voting securities of such issuer,
and (ii) not more than 25% of the value of its total assets will be invested in
the securities of any one issuer (other than U.S. Government securities or the
securities of other regulated investment companies).
NET ASSET VALUE
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The Trust uses the amortized cost method to value shares in the Money
Market 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.
The Money Market Funds invest 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 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 Money Market 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
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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 or she holds shares of a Fund and/or in his or her receiving upon
redemption a price per share lower than the price he or she 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, administrators, trustees or
guardians, and will accept other suitable verification arrangements from foreign
investors, such as consular verification.
The Trust may suspend the right of redemption or postpone the date of
payment for shares for more than seven days during any 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, I (formerly, Institutional) shares of
the Fund are sold to certain qualified investors at their net asset value
without a sales charge. A (formerly, Retail) shares of the Fund are sold to
public investors at the public offering price based on the Fund's net asset
value plus a front-end load or sales charge as described in the Prospectus. B
shares of the 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 Fund are sold to public investors at net asset value but are subject to a
contingent deferred sales charge which is payable upon redemption of such shares
as described in the Prospectus. There is no sales load or contingent deferred
sales charge imposed for shares acquired through the reinvestment of dividends
or distributions on such shares.
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For the fiscal year ended May 31, 1999, sales loads paid by shareholders were as
follows:
<TABLE>
<CAPTION>
PORTFOLIO SALES LOADS FOR YEAR ENDED 1999
<S> <C>
Armada International Equity Fund $
Armada Small Cap Value Fund $
Armada Small Cap Growth Fund $
Armada Equity Growth Fund $
Armada Tax Managed Equity Fund $
Armada Core Equity Fund $
Armada Equity Index Fund* $
Armada Equity Income Fund $
Armada Balanced Allocation Fund $
Armada Total Return Advantage Fund $
Armada Bond Fund $
Armada Intermediate Bond Fund $
Armada GNMA Fund $
Armada Enhanced Income Fund $
Armada Ohio Tax Exempt Bond Fund $
Armada Pennsylvania Municipal Bond Fund $
Armada National Tax Exempt Fund $
</TABLE>
*The Equity Index Fund commenced operations on __________. The figure shown
represents sales loads paid since this date.
As of May 31, 1999 the Mid Cap Growth, Large Cap Ultra, U.S. Government
Income and Michigan Municipal Bond have not commenced operations.
Automatic investment programs such as the monthly savings program
("Program") described in the Prospectus offered by the Funds permit an investor
to use "dollar cost averaging" in making investments. Under this Program, an
agreed upon fixed dollar amount is invested in Fund shares at predetermined
intervals. This may help investors to reduce their average cost per share
because the Program results in more shares being purchased during periods of
lower share prices and fewer shares during periods of higher share prices. In
order to be effective, dollar cost averaging should usually be followed on a
sustained, consistent basis. Investors should be aware, however, that dollar
cost averaging results in purchases of shares regardless of their price on the
day of investment or market trends and does not ensure a profit, protect against
losses in a declining market, or prevent a loss if an investor ultimately
redeems his or her shares at a price which is lower than their purchase price.
An investor may want to consider his or her financial ability to continue
purchases through periods of low price levels. From time to time, in
advertisements, sales literature, communications to shareholders and other
materials ("Materials"), the Trust may illustrate the effects of dollar cost
averaging through use of or comparison to an index such as the S&P 500 Index or
Lehman Intermediate Government Index.
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OFFERING PRICE PER A SHARE OF THE FUND
An illustration of the computation of the offering price per A share
of the Funds, based on the estimated value of the Fund's net assets and number
of outstanding shares on May 31, 1999, are as follows:
TABLE
INTERNATIONAL EQUITY FUND
Net Assets of A Shares......................................... $______
Outstanding A Shares........................................... ______
Net Asset Value Per Share...................................... $______
($______DIVIDED BY ______)
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
Offering to Public............................................. $______
SMALL CAP VALUE FUND
Net Assets of A Shares......................................... $______
Outstanding A Shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
Offering to Public............................................. $______
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SMALL CAP GROWTH FUND
Net Assets of A Shares......................................... $______
Outstanding A Shares........................................... ______
Net Asset Value Per Share
($______DIVIDED BY ______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
Offering to Public............................................. $______
EQUITY GROWTH FUND
Net Assets of A Shares......................................... $______
Outstanding A Shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY ______).................................. $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
Offering to Public............................................. $______
TAX MANAGED EQUITY FUND
Net Assets of A Shares......................................... $______
Outstanding A Shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
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Offering to Public............................................. $______
* Amounts are estimated as the Fund had not commenced operations as of
May 31, 1998.
CORE EQUITY FUND
Net Assets of A Shares......................................... $______
Outstanding A Shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
Offering to Public............................................. $______
EQUITY INDEX FUND
Net Assets of A Shares......................................... $______
Outstanding A Shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
Offering to Public............................................. $______
EQUITY INCOME FUND
Net Assets of A Shares......................................... $______
Outstanding A Shares........................................... ______
Net Asset Value Per Share
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<PAGE>
($_______DIVIDED BY ______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
Offering to Public............................................. $______
* Reflects current sales charge
BALANCED ALLOCATION FUND*
Net Assets of A Shares......................................... $______
Outstanding A Shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
Offering to Public............................................. $______
* Amounts are estimated as the Fund has not commenced operations.
TOTAL RETURN ADVANTAGE FUND
Net Assets of A Shares......................................... $______
Outstanding A Shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)*.................................... $______
Offering to Public............................................. $______
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* Reflects current sales charge
BOND FUND
Net Assets of A Shares......................................... $______
Outstanding A Shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)*.................................... $______
Offering to Public............................................. $______
* Reflects current sales charge
INTERMEDIATE BOND FUND
Net Assets of A Shares......................................... $______
Outstanding A Shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)*.................................... $______
Offering to Public............................................. $______
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<PAGE>
GNMA FUND
Net Assets of A Shares......................................... $______
Outstanding A Shares........................................... $______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)*.................................... $______
Offering to Public............................................. $______
* Reflects current sales charge
ENHANCED INCOME FUND
Net Assets of A Shares......................................... $______
Outstanding A Shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
Offering to Public............................................. $______
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OHIO TAX EXEMPT BOND FUND
Net Assets of A shares......................................... $______
Outstanding A shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
Offering to Public............................................. $______
PENNSYLVANIA TAX EXEMPT BOND FUND
Net Assets of A shares......................................... $______
Outstanding A shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
Offering to Public............................................. $______
NATIONAL TAX EXEMPT FUND
Net Assets of A shares......................................... $______
Outstanding A shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
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Offering to Public............................................. $______
ARMADA MID CAP GROWTH FUND
Net Assets of A shares......................................... $______
Outstanding A shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
Offering to Public............................................. $______
U.S. GOVERNMENT INCOME FUND
Net Assets of A shares......................................... $______
Outstanding A shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
Offering to Public............................................. $______
MICHIGAN TAX EXEMPT BOND FUND
Net Assets of A shares......................................... $______
Outstanding A shares........................................... ______
Net Asset Value Per Share
($_______DIVIDED BY______)................................... $______
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<PAGE>
Sales Charge, ______% of
offering price (______% of
net asset value per share)..................................... $______
Offering to Public............................................. $______
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<PAGE>
EXCHANGE PRIVILEGE
Investors may exchange all or part of their A or B shares as described
in the Prospectus. Any rights an Investor may have (or have waived) to reduce
the sales load applicable to an exchange, as may be provided in a Fund
Prospectus, will apply in connection with any such exchange. The exchange
privilege may be modified or terminated at any time upon 60 days' notice to
shareholders.
By use of the exchange privilege, the Investor authorizes the Transfer
Agent's financial institution or his or her financial institution to act on
telephonic or written instructions from any person representing himself or
herself to be the shareholder and believed by the Transfer Agent or the
financial institution to be genuine. The Investor or his or her financial
institution must notify the Transfer Agent of his or her prior ownership of A or
B shares and account number. The Transfer Agent's records of such instructions
are binding.
DESCRIPTION OF SHARES
The Trust is a Massachusetts business trust. The Trust's Declaration
of Trust authorizes the Board of Trustees to issue an unlimited number of shares
of beneficial interest and to classify or reclassify any unissued shares of the
Trust into one or more additional classes or series by setting or changing in
any one or more respects their respective preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption. Pursuant to such
authority, the Board of Trustees has authorized the issuance of the classes or
series of shares set forth in the Prospectus, including 78 classes or series,
which represent interests in the International Equity Fund (Class U, Class U -
Special Series 1 and Class U - Special Series 2), Small Cap Value Fund (Class N,
Class N - Special Series 1 and Class N - Special Series 2), Small Cap Growth
Fund (Class X, Class X - Special Series 1 and Class X - Special Series 2),
Equity Growth Fund (Class H, Class H - Special Series 1 and Class H - Special
Series 2), Tax Managed Equity Fund (Class Z, Class Z - Special Series 1 and
Class Z - Special Series 2); Core Equity Fund (Class W, Class W - Special Series
1 and Class W - Special Series 2), Equity Index Fund (Class V and Class V -
Special Series 1), Equity Income Fund (Class M, Class M - Special Series 1 and
Class M - Special Series 2), Balanced Allocation Fund (Class AA, Class AA -
Special Series 1 and Class AA - 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),
Intermediate Bond Fund (Class I, Class I - Special Series 1 and Class I -
Special Series 2), GNMA Fund (Class S Class S - Special Series 1 and Class S -
Special Series 2), Enhanced Income Fund (Class O, Class O - Special Series 1 and
Class O Special Series 2), Ohio Tax Exempt Bond Fund (Class K, Class K -Special
Series 1 and Class K - Special Series 2), Pennsylvania Tax Exempt Bond Fund
(Class T, Class T - Special Series 1 and Class T - Special Series 2), National
Tax Exempt Fund (Class L, Class L-Special Series 1 and Class L-Special Series
2); Ohio Municipal Money Market Fund (Class BB and Class BB - Special Series 1);
Pennsylvania Tax Exempt Money Market Fund (Class Q and Class Q - Special Series
1), Tax Exempt Money Market Fund (Class D, Class D - Special Series 1 and Class
D - Special Series 2), Money Market Fund (Class A, Class A -Special Series 1 and
Class A -
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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),
Mid Cap Growth Fund (Class GG, Class GG - Special Series 1 and Class GG -
Special Series 2), Large Cap Ultra Fund (Class II, Class II - Special Series 1
and Class II - Special Series 2), U.S. Government Income Fund (Class DD, Class
DD - Special Series 1 and Class DD - Special Series 2), Michigan Tax Exempt Bond
Fund (Class HH, Class HH - Special Series 1 and Class HH - Special Series 2) and
the Treasury Plus Money Market Fund (Class CC and Class CC - Special Series 1),
as 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 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 I and A 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
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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 or her 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 discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisers with
specific reference to their own tax situation.
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. In
order to qualify for tax treatment as a regulated investment company under the
Code, the Fund must satisfy, in addition to the distribution requirement
described in the Prospectus, certain requirements with respect to the source of
its income during a taxable year. At least 90% of the gross income of the Fund
must be derived from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stocks, securities or foreign
currencies, and other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to the Fund's business of
investing in such stock, securities or currencies. The Treasury Department may
by regulation exclude from qualifying income foreign currency gains which are
not directly related to the Fund's principal business of investing in stock or
securities, or options and futures with respect to stock or securities. Any
income derived by the Fund from a partnership or trust is treated as derived
with respect to the Fund's business of investing in stock, securities or
currencies only to the extent that such income is attributable to items of
income which would have been qualifying income if realized by the Fund in the
same manner as by the partnership or trust.
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 capital
gain net income each calendar year to avoid liability for this excise tax.
If for any taxable year the Fund does not qualify for federal tax
treatment as a regulated investment company, all of the Fund's taxable income
will be subject to federal income tax at regular corporate rates without any
deduction for distributions to its shareholders. In such
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event, dividend distributions (including amounts derived from interest on
Municipal Securities) 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.
A 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."
The tax principles applicable to transactions in financial instruments
and futures contacts and options that may be engaged in by a Fund, and
investments in passive foreign investment companies ("PFICs"), are complex and,
in some cases, uncertain. Such transactions and investments may cause a Fund to
recognize taxable income prior to the receipt of cash, thereby requiring the
Fund to liquidate other positions, or to borrow money, so as to make sufficient
distributions to shareholders to avoid corporate-level tax. Moreover, some or
all of the taxable income recognized may be ordinary income or short-term
capital gain, so that the distributions may be taxable to shareholders as
ordinary income.
In addition, in the case of any shares of a PFIC in which a Fund
invests, the Fund may be liable for corporate-level tax on any ultimate gain or
distributions on the shares if the Fund fails to make an election to recognize
income annually during the period of its ownership of the shares.
ADDITIONAL TAX INFORMATION CONCERNING THE OHIO MUNICIPAL, PENNSYLVANIA TAX
EXEMPT AND TAX EXEMPT MONEY MARKET FUNDS
As described above and in the Prospectus, the Ohio Municipal Money
Market, Pennsylvania Tax Exempt Money Market and Tax Exempt Market 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 Ohio Municipal Money Market, Pennsylvania Tax Exempt
Money Market and Tax Exempt Money Market 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
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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.
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 Ohio Municipal Money Market, Pennsylvania Tax
Exempt Money Market and Tax Exempt Money Market 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 or her trade or business and
whose 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.
ADDITIONAL TAX INFORMATION CONCERNING THE MICHIGAN TAX EXEMPT BOND FUND
As indicated in the Prospectus, the Michigan Tax Exempt Bond Fund is
designed to provide shareholders with current tax-exempt interest income. The
Fund is not intended to constitute a balanced investment program and is not
designed for investors seeking capital appreciation or maximum tax-exempt income
irrespective of fluctuations in principal. Shares of the Fund 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 individual
retirement accounts, since such plans and accounts are generally tax-exempt and,
therefore, would not gain any additional benefit from the Fund's dividends being
tax-exempt; furthermore, such dividends would be ultimately taxable to the
beneficiaries when distributed to them. In addition, the Fund may not be
appropriate investments for entities which are "substantial users," or "related
persons" thereof, of facilities financed by private activity bonds held by the
Fund. "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 or her
trade or business and whose gross revenues derived with respect to the
facilities financed by the issuance of bonds represent more than 50% of the
total revenues derived by any 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. "Related
persons" include certain related natural persons, affiliated corporations, a
partnership and its partners and an S Corporation and its shareholders.
The percentage of total dividends paid by the Michigan Tax Exempt Bond Fund
with respect to any taxable year which qualifies as federal exempt interest
dividends will be the same
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for all shareholders receiving dividends during such year. In order for the Fund
to pay exempt-interest dividends during any taxable year, at the close of each
fiscal quarter, at least 50% of the aggregate value of the Fund must consist of
exempt-interest obligations. In addition, the Fund must distribute 90% of the
aggregate exempt-interest income and 90% of the investment company taxable
income earned by it during the taxable year. After the close of the Fund's
taxable year, the Fund will notify each shareholder of the portion of the
dividends paid by the Fund to the shareholder with respect to such taxable year
which constitutes an exempt-interest dividend. However, the aggregate amount of
dividends as designated cannot exceed the excess of the amount of interest
exempt from tax under Section 103 of the Code received by the Fund during the
taxable year over any amounts disallowed as deductions under Section 265 and
171(a)(2) of the Code.
Although the Michigan Tax Exempt Bond Fund expects to qualify as a
regulated investment company and to be relieved of all or substantially all
federal income taxes, depending upon the extent of its 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, the Michigan Tax Exempt Bond Fund may be subject to the tax
laws of such states or localities. In addition, if for any taxable year the Fund
does not qualify for the special tax treatment afforded a regulated investment
company, all of its taxable income will be subject to federal tax at regular
corporate rates (without any deduction for distributions to its shareholders).
In such event, dividend distributions would be taxable to shareholders to the
extent of earnings and profits, and would be eligible for the dividends received
deduction for corporations.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting purchasers of shares of the Michigan Tax
Exempt Bond Fund. No attempt has been made to present a detailed explanation of
the federal income tax treatment of the Fund or its shareholders or of Michigan
state income tax treatment of the Fund or its shareholders, and this discussion
is not intended as a substitute for careful tax planning. Accordingly potential
purchasers of shares of the Fund are urged to consult their own tax advisers
with specific reference to their own tax situation. In addition, the foregoing
discussion is based on tax laws and regulations which are in effect on the date
of this Statement of Additional Information; such laws and regulations may be
changed by legislative or administrative action.
ADDITIONAL TAX INFORMATION CONCERNING THE OHIO TAX EXEMPT BOND FUND
The Ohio Tax Exempt Fund is not subject to the Ohio personal income 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 Fund
timely files the annual report required by Section 5733.09 of the Ohio Revised
Code. The Ohio Tax Commissioner has waived the annual filing requirement for
every tax year since 1990, the first year to which such requirement applied.
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Shareholders of the Fund otherwise subject to 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 Fund ("Distributions") to the extent that such Distributions are
properly attributable to interest on or gain from the sale of obligations issued
by or an behalf of Ohio, political subdivisions thereof or agencies on
instrumentalities of Ohio or its political subdivisions (Ohio Obligations).
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) represent "exempt-interest
dividends" for federal income tax purposes, or (c) are described in both (a) and
(b). Shares of the Fund will be included in a Shareholder's tax base for
purposes of computing 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 that is exempt from state income taxes
under the laws of the United States (including obligations issued by the
governments of Puerto Rico, the Virgin Islands or Guam and their authorities or
municipalities) ("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.
It is assumed for purposes of this discussion of State and Local Taxes
that the Fund will continue to qualify as a regulated investment company under
the Internal Revenue Code of 1986, as amended, 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.
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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 and Trustee Retired Co-Chairman of Ernst & Young,
32980 Creekside Drive April 1984 to September 1993; Director,
Pepper Pike, OH 44124 Cold Metal Products, Inc., since March
Age 65 1994; Director, Director, Strategic
Distribution, Inc., since January 1999.
Herbert R. Martens, Jr.* President and Trustee Executive Vice President, National City
c/o NatCity Investments, Inc. Corporation (bank holding company),
1965 East Sixth Street since July 1997; Chairman, President and
Cleveland, OH 44114 Chief Executive Officer, NatCity
Age 47 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 Chief Operating
13901 Shaker Blvd., #6B Officer, B.F. Goodrich Company, August
Cleveland, OH 44120 1986 to September 1990; Director, Adams
Age 73 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;
Director, Truseal Technologies (manufacturer
of insulated glass sealants), since April
1997.
John F. Durkott Trustee President and Chief Operating Officer,
8600 Allisonville Road Kittle's Home Furnishings Center, Inc.,
Indianapolis, IN 46250 since January 1982; partner, Kittles
Age 55 Bloomington Properties LLC, since January
1981; partner, KK & D II LLC,
since February 1998; Affiliated Real Estate
Companies of Kittle's Home Furnishing Center
since January 1989.
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Robert J. Farling Trustee Retired Chairman, President and Chief
1608 Balmoral Way Executive Officer, Centerior Energy
Westlake, OH 44145 (electric utility), March 1992 to
Age 62 October 1997; Director, National City
Bank until October 1997; Director,
Republic Engineered Steels,
October 1997 to September 1999.
Richard W. Furst, Dean Trustee Garnis D. Kincaid Professor of Finance and
2133 Rothbury Rd. Dean, Carol Martin Gatton College of Business
Lexington, KY 40515 and Economics, University of Kentucky, since
Age 60 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 and General
3679 Greenwood Drive Counsel, Eaton Corporation, since 1991
Pepper Pike, OH 44124 (global manufacturing); Trustee, Meridia
Age 61 Health System (four hospital health
system), 1994 to 1998; Trustee, WVIZ
Educational Television (public
television).
J. William Pullen Trustee President and Chief Executive Officer,
Whayne Supply Company Whayne Supply Co. (engine and heavy
1400 Cecil Avenue equipment distribution), since 1986;
P.O. Box 35900 President and Chief Executive Officer,
Louisville, KY 40232-5900 American Contractors Rentals & Sales
Age 60 (rental subsidiary of Whayne Supply
Co.), since 1988.
W. Bruce McConnel, III Secretary Partner of the law firm
One Logan Square Drinker Biddle & Reath LLP,
18th and Cherry Streets Philadelphia, Pennsylvania.
Philadelphia, PA 19103-6996
Age 56
John Leven Treasurer Director of Funds Accounting of SEI
One Freedom Valley Drive Investments since March 1999.
Oaks, PA 19456
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Lynda J. Striegel Vice President and Assistant Vice President and Assistant Secretary
One Freedom Valley Drive Secretary of Investments Mutual Fund Services and SEI
Oaks, PA 19456 Distribution Co. since 1998; Senior Asset
Age 51 Management Counsel, Barnett Banks, Inc. from
1997 to 1998; Partner, Groom and
Nordberg, Chartered from 1996 to 1997;
Associate General Counsel, Riggs Bank,
N.A. 1991 to 1995.
</TABLE>
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*Messrs. Carter and Martens are considered by the Trust to be
"interested persons" of the Trust as defined in the 1940 Act.
Each trustee of the Trust serves as a trustee of The Parkstone Group
of Funds ("Parkstone") and The Parkstone Advantage Fund ("Parkstone Advantage"),
registered investment companies.
Mr. Martens is an "interested person" because (1) he is an Executive
Vice President of National City Corporation, the parent corporation to IMC,
which receives fees as investment adviser to the Trust, (2) he owns shares of
common stock and options to purchase common stock of National City Corporation,
and (3) he is the Chief Executive Officer of NatCity Investments, Inc., a
broker-dealer affiliated with National City Investment Management Company.
Mr. Carter is an "interested person" of the Trust, as defined in the
1940 Act, due to his ownership of 7,200 shares of stock of National City
Corporation, an affiliate of National City Investment Management Company, the
Fund's investment adviser.
Mr. Leven and Ms. Striegel are employed by SEI Fund Resources, which
receives fees as Administrator to the Trust. Ms. Striegel 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.
With respect to the Trust, Parkstone and Parkstone Advantage, each
trustee receives an annual fee of $15,000 plus $3,000 for each Board meeting
attended and reimbursement of expenses incurred in attending meetings. The three
fund companies generally hold concurrent Board meetings. The Chairman of the
Board is entitled to receive an additional $5,000 per annum for services in such
capacity. For the fiscal year ended May 31, 1999, the Trust's trustees and
officers as a group received aggregate fees of $________. The trustees and
officers of the Trust own less than 1% of the shares of the Trust.
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The following table summarizes the compensation for each of the Trustees of
the Trust for the fiscal year ended May 31, 1999:
<TABLE>
<CAPTION>
Pension or Estimated
Aggregate Retirement Benefits Approval Total Compensation
Name of Compensation Accrued as Part of Benefits Upon from the Trust and
Person, Position from the Trust the Trust's Expense Retirement Fund Complex*
- ---------------- -------------- ------------------- ---------- -------------
<S> <C> <C> <C> <C>
Robert D. Neary, $0 $0 $0 $0
Chairman and Trustee
Leigh Carter, Trustee $0 $0 $0 $0
John F. Durkott, Trustee $0 $0 $0 $0
Robert J. Farling, Trustee $0 $0 $0 $0
Richard W. Furst, Trustee $0 $0 $0 $0
Gerald L. Gherlein, Trustee $0 $0 $0 $0
Herbert R. Martens, Jr., $0 $0 $0 $0
President and Trustee
J. William Pullen, Trustee $0 $0 $0 $0
</TABLE>
- -------------------
* The "Fund Complex" consists of Armada Funds, The Parkstone Group of Funds
and The Parkstone Advantage Funds. Each of the Trustees serves as Trustee
to all three investment companies. The Trustees became trustees of The
Parkstone Group of Funds and the Parkstone Advantage Fund effective August
14, 1998.
The Trustees may elect to defer payment of 25% to 100% of the fees they
receive in accordance with a Trustee Deferred Compensation Plan (the
"Plan"). Under the Plan, a Trustee may elect to have his or her deferred
fees invested by the Plan administrator in 91-day U.S. Treasury Bills,
initially, or upon implementation of the "shares option", and treated as
if they had been invested by the Trust in the shares of one or more
portfolios of the Trust or Parkstone Group of Funds. The amount paid to
the Trustee under the Plan will be determined based on the performance
of such investments.
Distributions are generally of equal installments over a period of 2 to
15 years. The Plan will remain unfunded for federal income tax purposes
under the Internal Revenue Code of 1986, as amended (the "Code").
Deferral of Trustee fees in accordance with the Plan will have a
negligible impact on portfolio assets and liabilities and will not obligate
the Trust to retain any Trustee or pay any underlying securities
without shareholder approval.
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SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. However, the Trust's Declaration of Trust provides that
shareholders shall not be subject to any personal liability for the acts or
obligations of the Trust, and that every note, bond, contract, order, or other
undertaking made by the Trust shall contain a provision to the effect that the
shareholders are not personally liable thereunder. The Declaration of Trust
provides for indemnification out of the trust property of any shareholder held
personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her 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 or her own bad faith,
willful misfeasance, gross negligence, or reckless disregard of his or her
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 or she may be involved or with which
he or she may be threatened by reason of his or her 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 or she been a trustee.
ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN
SERVICES AND TRANSFER AGENCY AGREEMENTS
ADVISORY AGREEMENTS
IMC serves as investment adviser to the: (a) International Equity,
Small Cap Value and Small Cap Growth Funds under an Advisory Agreement dated
August 13, 1998; (b) Equity Growth and Equity Income Funds under an Advisory
Agreement dated November 19, 1997; (c) Core Equity Fund under an Advisory
Agreement dated June 29, 1998; (d) Equity Index and Tax Managed Equity Funds
under an Advisory Agreement dated April 9, 1998; (e) Balanced Allocation Fund
under an Advisory Agreement Dated April 9, 1998; (f) Total Return Advantage Fund
and Enhanced Income Fund under an Advisory Agreement dated March 6, 1998; (g)
Bond Fund, Intermediate Bond Fund and GNMA Funds under an Advisory Agreement
dated November 21,
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1997; (h) Pennsylvania Tax Exempt, Tax Exempt, Money Market, Government and
Treasury Funds under an Advisory Agreement dated November 19, 1997; (i) Ohio
Municipal Fund pursuant to an Advisory Agreement dated April 9, 1998; (j) Ohio
Tax Exempt and Pennsylvania Tax Exempt Bond Funds under an Advisory Agreement
dated November 19, 1997; (k) National Tax Exempt Fund under an Advisory
Agreement dated April 9, 1998 and (l) Mid Cap Growth, U.S. Government Income,
Michigan Municipal Bond and the Treasury Plus Money Market Funds under an
Advisory Agreement dated August 5, 1998.
National Asset Management Corporation ("NAM") serves as investment
sub-adviser to the Core Equity Fund (the "sub-adviser"). Prior to such dates,
National City Bank or an affiliate served as adviser to the Funds other than the
Core Equity Fund. Prior to June 29, 1998, NAM served as adviser to the Core
Equity Fund. NAM serves as sub-investment adviser to the Total Return Advantage
Fund under a Sub-Advisory Agreement with IMC dated March 6, 1998 and until June
29, 1998 served as investment adviser to the Total Return Advantage and Enhanced
Income Funds. IMC, the three Advisers, National City Bank and these affiliates
(including NAM until March 6, 1998) are affiliates of National City Corporation,
a bank holding company with $81 billion in assets, and headquarters in
Cleveland, Ohio and over 1,000 branch offices in six states. From time to time,
the adviser may voluntarily waive fees or reimburse the Trust for expenses.
Pursuant to the advisory agreements in effect for the following
periods, the Trust incurred advisory fees in the following amounts for the
fiscal years ended May 31, 1999, 1998 and 1997: (i) $______ (after waivers of
$___), $1,989,606 (after waivers of $0) and $982,053 with respect to the Small
Cap Value Fund; (ii) $______ (after waivers of $___), $2,395,579 (after waivers
of $0), and $1,612,194 with respect to the Equity Growth Fund; and (iii) $______
(after waivers of $___), $1,237,195 (after waivers of $0), and $669,107 with
respect to the Equity Income Fund. For the fiscal year ended 1999, and the
period from August 1, 1997 (commencement of operations) to May 31, 1998, the
International Equity, Small Cap Growth and Core Equity Funds incurred advisory
fees in the amount of $_______, $______, $______, (after fee waivers of $______,
$_____ and $______) and $570,684, 208,833, and 608,222, (after fee waivers of
$50,784, $18,000, and $64, 683 respectively. For the fiscal year ended 1999, and
the period from May 31, 1998 to May 31, 1999, the Tax Managed Equity Fund
incurred advisory fees in the amount of $______ (after fee waivers of $___) and
$173,851 (after fee waivers of $0). The Equity Index Fund commenced operations
on __________, and as of May 31, 1999 paid advisory fees of $________. The Mid
Cap Growth and Large Cap Ultra Funds have not yet commenced operations. The
Balanced Allocation Fund commenced operations on ______. Advisory fees were
$______, $______ and $______ for 1999, 1998, and 1997.
Pursuant to the advisory agreements relating to the Total Return
Advantage, Intermediate Bond and Enhanced Income Funds then in effect, the Trust
incurred advisory fees in the following respective amounts for the fiscal years
ended May 31, 1999, 1998 and 1997: (i) $__________ (after waivers of
$__________), $404,823 (after waivers of $1,133,101), and $0 (after waivers of
$1,530,963) for the Total Return Advantage Fund; (ii) $__________ (after waivers
of $__________), $593,301 (after waivers of $222,488), and $550,261 (after
waivers of $118,288) for the Intermediate Bond Fund; and (iii) $__________
(after waivers of $__________) $65,970, (after waivers of $264,973) and $0
(after waivers of $296,129) for the
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Enhanced Income Fund. The Michigan Tax Exempt Bond Fund has not yet commenced
operations.
Pursuant to the advisory agreements relating to the Bond and GNMA
Funds then in effect, the Trust incurred advisory fees in the following amounts
for the fiscal years ended May 31, 1999 and 1998 and 1997: (i) $__________
(after waivers of $__________), $574,688 (after waivers of $0) and $485,145
(after fee waivers of $54,417) for the Bond Fund and (ii) $__________ (after
waivers of $__________), $395,769 (after waivers of $0) and $323,854 (after fee
waivers of $50,450) for the GNMA Fund.
For the period from September 9, 1996 (date of reorganization of the
Predecessor Funds) until May 31, 1997, IMC earned advisory fees of $366,399, and
$256,168 and waived fees in the amounts of $0 and $0 for the Bond and GNMA
Funds, respectively. Integra Trust Company ("Integra"), the investment adviser
to the Predecessor Bond and GNMA Funds, earned the following advisory fees with
respect to such funds for the stated periods: (i) $173,163 and $118,136 for the
period from June 1, 1996 until September 9, 1996; (ii) $53,654 and $36,971 for
the one-month period ended May 31, 1996 Integra waived advisory fees during the
same periods in the amounts of: (i)$54,417 and $50,450 and (ii) $11,464and
$9,583, respectively.
Pursuant to the advisory agreements in effect for the following
periods, the Trust incurred advisory fees in the following amounts for the
fiscal years ended May 31, 1999, 1998 and 1997: (i) $__________ (after waivers
of $__________), $742,324 (after waivers of $989,768) and $573,529 (after
waivers of $764,704), respectively, for the Tax Exempt Money Market Fund; (ii)
$__________ (after waivers of $__________), 6,126,877 (after waivers of
$2,451,233) and $5,067,456 (after waivers of $2,026,982) and respectively, for
the Money Market Fund; and (iii) $__________ (after waivers of $__________),
$2,815,875 (after waivers of $1,126,349) and $2,415,282 (after waivers of
$966,112), respectively, for the Government Money Market Fund. Advisory fees in
the amounts of $__________ (after waivers of $__________), $766,895 (after
waivers of $153,379) and $794,834 (after waivers of $158,966) were incurred for
the fiscal year ended May 31, 1999, 1998 and 1997 with respect to the Treasury
Money Market Fund.
Pursuant to the Advisory Agreement, the Trust incurred advisory fees
in the amount of $__________ (after waivers of $__________) and $142,220 (after
waivers of $237,029) for the fiscal years ended May 31, 1999 and 1998 for the
Pennsylvania Tax Exempt Money Market Fund. For the period from September 9, 1996
(date of reorganization of the Predecessor Fund) until May 31, 1997, IMC, the
Adviser of the Pennsylvania Tax Exempt Money Market 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 and for the one-month
period ended May 31, 1996, the Integra Trust Company ("Integra"), the investment
adviser to the Predecessor Fund, earned advisory fees of $85,768 and $26,907,
respectively. Integra waived fees in the amount of $51,068 and $9,868. The Ohio
Municipal Money Market Fund commenced operations on ________. Advisory fees were
$________, $_________ and $_________ for 1999, 1998 and 1997.
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Pursuant to the advisory agreements in effect for the following
periods, the Trust incurred with respect to the Ohio Tax Exempt Bond Fund
advisory fees of $__________, $0 (after waivers of $649,247) and $0 (after
waivers of $490,179).
Pursuant to the advisory agreements in effect for the fiscal years
ended May 31, 1999 and 1998, the Trust incurred with respect to the Pennsylvania
Tax Exempt Bond Fund advisory fees of $__________ and $150,120 (after waivers of
$56,245). For the period from September 9, 1996 (date of reorganization of the
predecessor fund to the Pennsylvania Tax Exempt Bond Fund) until May 31, 1997,
National City Bank, the then adviser of the Pennsylvania Tax Exempt Bond Fund,
earned advisory fees of $147,646 and waived fees in the amount of $2,684 with
respect to that Fund. For the period from June 1, 1996 until September 9, 1996,
and for the one-month period ended May 31, 1996, Integra Trust Company
("Integra"), the investment adviser to the Predecessor fund to the Pennsylvania
Tax Exempt Bond Fund, earned advisory fees of $73,107 and $23,057. Integra
waived fees in the amounts of $26,413 and $6,792.
For the fiscal year ended May 31, 1999 and the fiscal period April 9,
1998 (commencement of operations) through May 31, 1998, the Trust incurred with
respect to the National Tax Exempt Fund advisory fees of $__________ and $0
(after waivers of $62,113).
Each Advisory and Sub-Advisory Agreement provides that the Adviser and
sub-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 or Sub-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 or Sub-adviser in the performance of their duties or from
reckless disregard by them of their duties and obligations thereunder.
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 IMC
relating to the Ohio Municipal Fund Funds was approved by the sole shareholder
of the Fund as of the day prior to the day it commenced operations.
The Advisory Agreement relating to the International Equity, Small Cap
Value and Small Cap Growth Funds was approved by the shareholders of these Funds
on August 13, 1998. The Advisory Agreement relating to the Equity Growth and
Equity Income Funds was approved by the shareholders of each of these Funds on
November 19, 1997. With respect to the Core Equity Fund, the Advisory Agreement
with National City and the Sub-Advisory Agreement with NAM was approved by the
Fund's shareholders on June 29, 1998. The Advisory Agreement relating to the Tax
Managed Equity and Equity Index Funds was approved by their sole shareholders
prior to the Funds' commencement of operations. The current Advisory Agreement
with respect to the Total Return Advantage Fund and Enhanced Income Fund was
approved by a majority of shareholders of each such Fund at a Special Meeting of
Shareholders held on June 29, 1998 in order to approve such Advisory Agreement.
The Advisory Agreement relating to the Ohio Tax Exempt and Pennsylvania Tax
Exempt Bond Funds was approved by the shareholders of the Funds
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on November 19, 1997 and by the sole shareholder of the National Tax Exempt Fund
as of the day prior to the day it commenced operations. The current Advisory
Agreement with respect to the other Funds was approved by a majority of
shareholders of each such Fund at a Special Meeting of Shareholders held on
November 19, 1997 in order to approve such Advisory Agreement. The current
Sub-Advisory Agreement with respect to the Total Return Advantage Fund was
approved by a majority of shareholders of the Fund at a Special Meeting of
Shareholders held on June 29, 1998 in order to approve such Sub-Advisory
Agreement. The Advisory Agreement with respect to the Mid Cap Growth, U.S.
Government Income, Michigan Municipal Bond and Treasury Plus Money Market Funds
was approved by the sole shareholder of each Fund on the date it commenced
operations.
Unless sooner terminated, the Advisory Agreements will continue in
effect with respect to the Funds to which they relate 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
Funds (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 and Sub-Advisory Agreement may be terminated by the
Trust or the Adviser or sub-advisers on 60 days written notice, and will
terminate immediately in the event of its assignment.
AUTHORITY TO ACT AS INVESTMENT ADVISER
Banking laws and regulations, including the Glass-Steagall Act as
presently interpreted by the Board of Governors of the Federal Reserve System,
(a) prohibit a bank holding company registered under the Federal Bank Holding
Company Act of 1956 or any affiliate thereof from sponsoring, organizing, or
controlling a registered, open-end investment company continuously engaged in
the issuance of its shares, but (b) do not prohibit such a bank holding company
or affiliate from acting as investment adviser, transfer agent, or custodian to
such an investment company. The Adviser believes that it may perform the
services for the Fund contemplated by its Advisory Agreement with the Trust as
described in such agreement without violation of applicable banking laws or
regulations. However, there are no controlling judicial precedents and future
changes in legal requirements relating to the permissible activities of banks
and their affiliates, as well as future interpretations of present requirements,
could prevent the Adviser from continuing to perform services for the Trust. If
the Adviser were prohibited from providing services to the Fund, the Board of
Trustees would consider selecting another qualified firm. Any new investment
advisory agreement would be subject to shareholder approval.
Should future legislative, judicial, or administrative action prohibit
or restrict the proposed activities of the Adviser, or its affiliated and
correspondent banks in connection with shareholder purchases of Fund shares, the
Adviser and its affiliated and correspondent banks might be required to alter
materially or discontinue the services offered by them to shareholders. It is
not anticipated, however, that any resulting change in the Trust's method of
operations would affect its net asset value per share or result in financial
losses to any shareholder.
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If current restrictions preventing a bank or its affiliates from
legally sponsoring, organizing, controlling, or distributing shares of an
investment company were relaxed, the Adviser, or an affiliate of the Adviser,
would consider the possibility of offering to perform additional services of the
Trust. Legislation modifying such restrictions has been proposed in past
sessions in Congress. It is not possible, of course, to predict whether or in
what form such legislation might be enacted or the terms upon which the Adviser,
or such an affiliate, might offer to provide such services.
ADMINISTRATION AGREEMENT AND SUB-ADMINISTRATION AGREEMENT
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 One Freedom Valley Drive, 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, Alpha Select Funds, The Arbor Fund, ARK Funds, Armada Funds, Parkstone
Advantage Fund, Bishop Street Funds, Boston 1784 Funds-Registered Tradmark-,
CNI Charter Funds, CrestFunds, Inc., CUFUND, The Expedition Funds, First
American Funds, Inc., First American Investment Funds, Inc., First American
Strategy Funds, Inc., HighMark Funds, Huntington Funds, The Nevis Fund, Oak
Associates Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., SEI
Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI
Institutional International Trust, SEI Liquid Asset Trust, SEI Tax Exempt
Trust, STI Classic Funds, STI Classic Variable Trust, TIP Funds and UAM
Funds, Inc. II.
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 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.
IMC serves as sub-administrator for each of the Funds and provides
certain services as may be requested by the Administrator from time to time. For
its services as Sub-Administrator, IMC receives, from the Administrator,
pursuant to its Sub-Administration Agreement with the
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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.
The Trust incurred the following fees to SEI for the fiscal year ended
May 31, 1999 and the period from May 1, 1998 (April 9, 1998 in the case of the
Tax Managed Equity Fund pursuant to an agreement substantially identical to the
Administration Agreement) through May 31, 1998: $8,857 (after waivers of $0)
with respect to the International Equity Fund; $__________ (after waivers of
$__________) and $16,100 (after waivers of $0) with respect to the Small Cap
Value Fund; $4,252 (after waivers of $0) with respect to the Small Cap Growth
Fund; $__________ (after waivers of $__________) and $19,814 with respect to the
Equity Growth Fund (after waivers of $0); $__________ (after waivers of
$__________) and $15,886 (after waivers of $0) with respect to the Tax Managed
Equity Fund; $__________ (after waivers of $__________) and $6,096 (after
waivers of $0) with respect to the Core Equity Fund; and $__________ (after
waivers of $__________) $__________ (after waivers of $__________) and $10,576
(after waivers of $0) with respect to the Equity Income Fund; .
The Equity Index Fund commenced operations on ___________, and as of
May 31, 1999 paid Administration fees of $____________.
Prior to May 1, 1998, PFPC served as the administrator and accounting
agent to the Funds other than the Tax Managed Equity Fund. Pursuant to the
former Administration and Accounting Services Agreement, the Trust incurred the
following fees to PFPC for the period from June 1, 1997 to April 30, 1998 and
the fiscal year ended May 31, 1997 : $227,796 and $130,930 (after waivers of $0
and $0) with respect to the Small Cap Value Fund; $264,998 and $208,810 (after
waivers of $0 and $0) with respect to the Equity Growth Fund; and $148,763 and
$89,214 (after waivers of $0 and $0) with respect to the Equity Income Fund. For
the period from August 1, 1997 (commencement of operations) to April 30, 1998,
the Small Cap Growth, International Equity and Core Equity Funds incurred the
following fees to PFPC pursuant to the former Administration and Accounting
Services Agreement: $7,970 (after waivers of $17,879) with respect to the Small
Cap Growth Fund; $0 (after waivers of $71,716) with respect to the International
Equity Fund; and $0 (after waivers of $80,647) with respect to the Core Equity
Fund.
For the fiscal year ended May 31, 1999, the Administrator earned
administration fees of $__________, $__________, $__________, $__________ and
$__________, (after waivers of $__________, $__________, $__________,
$__________ and $__________) with respect to the Total Return Advantage, Bond,
Intermediate Bond, GNMA and Enhanced Income Funds. For the period from May 1,
1998 through May 31, 1998, the Administrator earned administration fees of
$13,648, $6,901, $8,873, $4,405 and $4,081 with respect to the Total Return
Advantage, Bond, Intermediate Bond, GNMA and Enhanced Income Funds.
Prior to May 1, 1998, PFPC served as the administrator and accounting
agent to the Trust. The services provided as administrator and accounting agent
and current fees are described in the Prospectus. Pursuant to the former
Administration and Accounting Services Agreement, the Trust incurred the
following respective fees to PFPC for the fiscal period ended
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April 30, 1998 and for the fiscal year ended May 31, 1997: (i) $241,258 and
$258,768 for the Total Return Advantage Fund; (ii) $135,648 and $121,554 for the
Intermediate Bond Fund; and (iii) $67,984 and $65,807 for the Enhanced Income
Fund and the Trust incurred $94,631 and $65,665 and in respective fees to PFPC
for the fiscal period ended April 30, 1998 with respect to Bond and GNMA Funds.
For the period from September 9, 1996 (date of reorganization of the
Predecessor Funds) until May 31, 1997, PFPC earned administration fees of
$66,618 and $46,576 for the Bond and GNMA Funds, respectively. SEI Financial
Management Corporation, a wholly-owned subsidiary of SEI Corporation, served as
administrator to the Predecessor Bond and GNMA Funds and earned the following
fees with respect to such funds for the stated periods: (i) $44,528 and $30,378
for the period from June 1, 1996 until September 9, 1996 and (ii) $13,797 and
$9,507 for the one-month period ended May 31, 1996.
For the fiscal year ended May 31, 1999, the Administrator earned
administration fees of $__________, $__________ and $__________ with respect to
the Ohio Tax Exempt, Pennsylvania Municipal and National Tax Exempt Funds (after
waivers of $__________, $__________ and $_________). For the period from May 1,
1998 (April 9, 1998 in the case of the National Tax Exempt Fund pursuant to an
agreement substantially identical to the Administration Agreement), the
Administrator earned administration fees of $9,113, $2,069 and $8,247 with
respect to the Ohio Tax Exempt, Pennsylvania Municipal and National Tax Exempt
Funds (after waivers of $0, $0 and $0), respectively.
Prior to May 1, 1998, PFPC served as the administrator and accounting
agent to the Ohio Tax Exempt and Pennsylvania Tax Exempt Bond Funds. Pursuant to
the Administration and Accounting Services Agreement, the Trust incurred the
following fees to PFPC for the period ended April 30, 1998, and fiscal year
ended May 31 1997 with respect to the Ohio Tax Exempt Bond Fund (i) $105,026 and
$89,124, respectively, for the Ohio Tax Exempt Bond Fund; and (ii) $36,010, for
the fiscal period end April 30, 1998 with respect to the Pennsylvania Tax Exempt
Bond Fund. For the period from September 9, 1996 (date or reorganization of the
Predecessor Fund) until May 31, 1997, PFPC earned administration fees of $26,845
with respect to the Pennsylvania Tax Exempt Bond Fund. For the period from June
1, 1996 until September 9, 1996 and for the one-month period ended May 31, 1996
SEI Financial Management Corporation, a wholly-owned subsidiary of SEI
Corporation, served as administrator to the Predecessor Fund and earned the
following fees: $_______, $_________ and $________, respectively, and waived
fees of $________, ________ and ___________ respectively.
For the period from June 1, 1997 to April 30, 1998, PFPC earned
administration fees of $36,010 with respect to the Pennsylvania Tax Exempt 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, and for the one-month period ended May 31, 1996, 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 and $8,969; respectively.
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For the three year periods ending May 31, 1999, 1998 and 1997, the
Administrator earned administration fees of $__________, $__________,
$__________, $__________ and $__________ with respect to the Pennsylvania Tax
Exempt Funds, Tax Exempt, Money Market, Government and Treasury Funds. For the
period from May 1, 1998 through May 31, 1998, the Administrator earned
administration fees of $5,562, $29,782, $138,647, $68,244, and $18,670 with
respect to the Pennsylvania Tax Exempt, Tax Exempt, Money Market, Government,
and Treasury Funds.
Prior to May 1, 1998, PFPC served as the administrator and accounting
agent to the Funds. Pursuant to the former Administration and Accounting
Services Agreement, the Trust incurred the following fees to PFPC for the period
from June 1, 1997 to April 30, 1998 and the fiscal year ended 1997: (i) $187,219
and $170,489, respectively, for the Tax Exempt Fund; (ii) $523,266 and $502,464,
respectively, for the Money Market Fund; (iii) $239,017 and $239,708,
respectively, for the Government Fund; and (iv) $_____, $_______and $_____
respectively for the Treasury Fund.
IMC 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, IMC 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
The Distributor acts as distributor of the Fund's shares pursuant to
its Distribution Agreement with the Trust as described in the Prospectus. Shares
are sold on a continuous basis.
Pursuant to Rule 12b-1 of the 1940 Act, the Trust has adopted a
Service and Distribution Plan for A and I shares (the "A and I 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 I and A shares, or B shares, respectively.
As required by Rule 12b-1, the Trust's Distribution Plans and related
Distribution Agreements have been approved, and are subject to annual approval
by, a majority of the Trust's Board of Trustees, and by a majority of the
trustees who are not interested persons of the Trust and have no direct or
indirect interest in the operation of the Distribution Plans or any agreement
relating to the Distribution Plans, by vote cast in person at a meeting called
for the purpose of voting on the Distribution Plans and related agreements. In
compliance with the Rule, the trustees requested and evaluated information they
thought necessary to an informed determination of whether the Distribution Plans
and related agreements should be implemented, and concluded, in the exercise of
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.
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Rule 12b-1 also requires that persons authorized to direct the
disposition of monies payable by a fund (in the Trust's case, the Distributor)
provide for the trustees' review of quarterly reports on the amounts expended
and the purposes for the expenditures.
Any change in either Distribution Plan that would materially increase
the distribution expenses of a class would require approval by the shareholders
of such class, but otherwise, such Distribution Plan may be amended by the
trustees, including a majority of the disinterested trustees who do not have any
direct or indirect financial interest in the particular Plan or related
agreement. The Distribution Plans and related agreement may be terminated as to
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 A and I Shares Plan provides that each fund will reimburse the
Distributor for distribution expenses related to the distribution of A and I
shares in an amount not to exceed .10% per annum of the average aggregate net
assets of such 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.
Under the former A and I Shares Plan and related distribution
agreement (effective for the period from June 1, 1997 to May 1, 1998) each fund
compensated the Distributor for distribution expenses related to the
distribution of I and A shares in an amount not to exceed .10% per annum of the
average aggregate net assets of such shares. This former Plan provided that the
Trust pay the Distributor an annual base fee of $1,250,000 plus incentive fees
based upon asset growth payable monthly and accrued daily by all of the Trusts'
investment funds with respect to the I and A shares.
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 fiscal years ended May 31, 1999, the Trust paid the
Distributor the following approximate amounts of under the A and I Shares Plan
and B Shares Plan for its distribution services and shareholder service
assistance:
<TABLE>
<CAPTION>
PORTFOLIO FISCAL YEAR 1999
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<S> <C>
International Equity Fund $
Small Cap Value Fund $
Small Cap Growth $
Equity Growth Fund $
Tax Managed Equity Fund $
Core Equity Fund $
Equity Index Fund* $
Equity Income Fund $
Balanced Allocation Fund $
Total Return Advantage Fund $
Bond Fund $
Intermediate Bond Fund $
GNMA Fund $
Enhanced Income Fund $
Ohio Tax Exempt Bond Fund $
Pennsylvania Tax Exempt Bond Fund $
National Tax Exempt Fund $
Ohio Municipal Money Market Fund $
Pennsylvania Tax Exempt Money Market Fund $
Tax Exempt Money Market Fund $
Money Market Fund $
Government Money Market Fund $
Treasury Money Market Fund $
Mid Cap Growth Fund NA
Large Cap Ultra Fund NA
U.S. Government Income Fund NA
Michigan Tax Exempt Bond Fund NA
Treasury Plus Money Market Fund NA
</TABLE>
*The Equity Index Fund commenced operations on __________. The figure
listed represents distribution fees for the period since that date.
As of May 31, 1999, the Mid Cap Growth, Large Cap Ultra, U.S.
Government Income, Michigan Municipal Bond and Treasury Plus Money Market Funds
had not commenced operations.
Of the aggregate amounts paid to the Distributor by the Trust with respect
to the Pennsylvania Tax Exempt Fund, approximately $__________ was attributable
to distribution services and approximately $___________ was attributable to
marketing/consultation. Of the aggregate amounts paid to the Distributor by the
Trust with respect to the Tax Exempt Fund, approximately $__________ was
attributable to distribution services and $__________ was attributable to
marketing/consultation. Of the aggregate amount paid to the Distributor by the
Trust with respect to the Government Fund, approximately $__________ was
attributable to distribution services and approximately $__________ was
attributable to marketing/consultation. Of the
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aggregate amounts paid to the Distributor by the Trust with respect to the
Treasury Fund approximately $__________ was attributable to distribution
services and approximately $__________ 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.
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.
CUSTODIAN SERVICES AND TRANSFER AGENCY AGREEMENTS
National City Bank, 1900 East Ninth St., Cleveland, Ohio 44114
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 the Fund; (ii) hold and
disburse portfolio securities on account of the Fund; (iii) collect and make
disbursements of money on behalf of the Fund; (iv) collect and receive all
income and other payments and distributions on account of the Fund's
portfolio securities; (v) respond to correspondence by security brokers and
others relating to its duties; and (vi) make periodic reports to the Board of
Trustees concerning the Fund's operations. National City Bank is authorized
to select one or more banks or trust companies to serve as sub-custodian on
behalf of the 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 Money Market, Government,
Treasury, Tax Exempt, Pennsylvania Tax Exempt and Ohio Money Market 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.
State Street Bank and Trust Company (the "Transfer Agent"), P.O.
Box 8421 Boston, Massachusetts 02266-8421 serves as the Trust's transfer
agent and dividend disbursing agent with respect to the Fund. Under its
Transfer Agency Agreement, it has agreed to: (i) issue and redeem shares of
the Fund; (ii) transmit all communications by the Fund to its shareholders of
record, including reports to shareholders, dividend and distribution notices
and proxy materials for meetings of shareholders; (iii) respond to
correspondence by security brokers and others relating to its duties; (iv)
maintain shareholder accounts; and (v) make periodic reports to the Board of
Trustees concerning the Fund's operations. The Transfer Agent sends each
shareholder of record a monthly statement showing the total number of shares
owned as of the last business day of the month (as well as the dividends paid
during the current month and year), and provides each shareholder of record
with a daily transaction report for each day on which a transaction occurs in
the shareholder's account with each Fund.
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SHAREHOLDER SERVICES PLANS
As stated in the Prospectus, the Trust has implemented the Shareholder
Services Plan for each Fund's A shares and the B Shares Plan for each Fund's 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 A shares or B shares in
consideration for the payment of up to .25% (on an annualized basis) for the
International Equity, Small Cap Value, Small Cap Growth, Equity Growth, Tax
Managed Equity, Core Equity, Equity Index, Equity Income, Balanced Allocation,
Total Return Advantage, Bond, Intermediate Bond, GNMA, Ohio Tax Exempt,
Pennsylvania Municipal, National Tax Exempt, Mid Cap Growth, U.S. Government
Income and Michigan Tax Exempt Bond Funds; .15% (on an annualized basis) for the
Ohio Municipal Money Market, Pennsylvania Tax Exempt Money Market, Tax Exempt
Money Market, Money Market, Government Money Market, Treasury Money Market and
Treasury Plus Money Market Funds; .10% (on an annualized basis), in the case of
the Enhanced Income Fund, 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 A or B shares; (iii) processing dividend payments from the
Funds; (iv) providing information periodically to customers showing their
position in A or B shares; (v) arranging for bank wires; (vi) responding to
customer inquiries relating to the services performed with respect to A or B
shares beneficially owned by customers; (vii) forwarding shareholder
communications; and (viii) other similar services requested by the Trust.
Agreements between the Trust and financial institutions will be terminable at
any time by the Trust without penalty.
PORTFOLIO TRANSACTIONS
Pursuant to its Advisory Agreement with the Trust, IMC is responsible
for making decisions with respect to and placing orders for all purchases and
sales of portfolio securities for the Fund. The Adviser or Sub-Adviser purchases
portfolio securities either directly from the issuer or from an underwriter or
dealer making a market in the securities involved. Purchases from an underwriter
of portfolio securities include a commission or concession paid by the issuer to
the underwriter and purchases from dealers serving as market makers may include
the spread between the bid and asked price. Transactions on stock exchanges
involve the payment of negotiated brokerage commissions. There is generally no
stated commission in the case of securities traded in the over-the-counter
market, but the price includes an undisclosed commission or mark-up.
For the fiscal years ended May 31, 1999, 1998 and 1997, the Small Cap
Value, Equity Growth, Equity Income and, Total Return Advantage Funds paid
$_____, $780,933 and $421,322; $_____, $1,398,444, and $803,733; $_____, $86,349
and $102,856; $______, $0 and $0 in brokerage commissions, respectively. For the
same periods, the Intermediate Bond and Enhanced Income Funds did not pay any
brokerage commissions. For the fiscal year ending May 31, 1999 and the period
from August 1, 1997 (commencement of operations) to May 31, 1998, the
International Equity, Small Cap Growth and Core Equity Funds paid $_______ and
$290,141;
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$______ and $51,366; and $______ and $0, in brokerage commissions, respectively.
For the fiscal year ending May 31, 1999 and the period from April 9, 1998
(commencement of operations) to May 31, 1998, the Tax Managed Equity Fund paid
$__________ and $0 in brokerage commissions. As of May 31, 1999, the Equity
Index, Mid Cap Growth, Large Cap Ultra, U.S. Government Income, Michigan
Municipal Bond and Treasury Plus Money Market Funds had not yet commenced
operations.
[For the fiscal years ended May 31,1999, 1998, and the period from
September 9, 1996 (date of reorganization of the Predecessor Funds) until May
31, 1997, the Bond and GNMA Funds paid no brokerage commissions. For the period
from June 1, 1996 until September 9, 1996, the one-month fiscal period ended May
31, 1996, the Predecessor Bond and GNMA Funds did not pay any brokerage
commissions.]
[For the fiscal years ended May 31, 1999, 1998, 1997, the Ohio Tax
Exempt Bond Fund did not pay any brokerage commissions.]
For the fiscal years ended May 31, 1999 and 1998, the Pennsylvania Tax
Exempt Bond Fund paid $__________ and $0 in brokerage commission. For the period
from September 9, 1996 (date of reorganization of the Predecessor fund to the
Pennsylvania Tax Exempt Bond Fund) until May 31, 1997, the Pennsylvania Tax
Exempt Bond Fund paid brokerage commissions of $0. For the period from June 1,
1996 until September 9, 1996, for the one-month period ended May 31, 1996, the
Pennsylvania Tax Exempt Bond Fund paid no brokerage commissions. For the fiscal
year 1999 and the period from April 9, 1998 (date of commencement of operations)
until May 31, 1998, the National Tax Exempt Fund paid brokerage commissions of
$__________ and $0.
While the Adviser (including the Sub-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
Advisory Agreement, pursuant to Section 28(e) of the Securities Exchange Act of
1934, as amended, the Adviser is authorized to negotiate and pay higher
brokerage commissions in exchange for research services rendered by
broker-dealers. Subject to this consideration, broker-dealers who provide
supplemental investment research to the Adviser may receive orders for
transactions by the Fund. Information so received is in addition to and not in
lieu of services required to be performed by the Adviser and does not reduce the
fees payable to the Adviser by the Fund. Such information may be useful to the
Adviser in serving both the Trust and other clients, and, similarly,
supplemental information obtained by the placement of business of other clients
may be useful to the Adviser in carrying out its obligations to the Trust.
Portfolio securities will not be purchased from or sold to the Trust's
Adviser, Distributor, or any "affiliated person" (as such term is defined under
the 1940 Act) of any of them acting as principal, except to the extent permitted
by the SEC. In addition, the Fund will not give preference to its Adviser's
correspondents with respect to such transactions, securities, savings deposits,
repurchase agreements and reverse repurchase agreements.
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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, 1999, (a) the International Equity Fund had entered into repurchase
transactions with: Goldman Sachs; (b) the Small Cap Growth Fund had entered into
repurchase transactions with: Goldman Sachs; (c) the Tax Managed Equity Fund had
entered into repurchase transactions with: Goldman Sachs; (d) the Core Equity
Fund had entered into repurchase transactions with: Goldman Sachs; (e) the Bond
Fund had entered into repurchase transactions with Goldman Sachs; (f) the GNMA
Fund had entered into repurchase transactions with: Goldman Sachs; (g) the Tax
Exempt Fund had entered into repurchase transactions with Goldman Sachs; (h) the
Money Market Fund had entered into repurchase transactions with: Prudential
Bache Securities; (i) the Government Fund had entered into repurchase
transactions with: Prudential Bache Securities and Goldman Sachs; and (j) the
Treasury Fund had entered into repurchase transactions with Goldman Sachs; and .
While serving as Adviser to the Fund, 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.
Investment decisions for the Fund are made independently from those
for the other Funds and for other investment companies and accounts advised or
managed by the Adviser. Such other Funds, investment companies and accounts may
also invest in the same securities as the Fund. When a purchase or sale of the
same security is made at substantially the same time on behalf of the Fund and
another investment company or account, the transaction will be averaged as to
price, and available investments allocated as to amount, in a manner which the
Adviser believes to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
sold by the Fund. In connection therewith, and to the extent permitted by law,
and by the Advisory Agreement, the Adviser may aggregate the securities to be
sold or purchased for the Fund with those to be sold or purchased for other
investment companies or advisory clients.
AUDITORS
Ernst & Young LLP, independent auditors, with offices at Two Commerce
Square, 2001 Market Street, Suite 4000, Philadelphia, Pennsylvania 19103, serve
as independent auditors of the Trust The financial statements, as of and for the
period ended May 31, 1999, for all the Funds (other than the Equity Index Fund
and Ohio Municipal Money Market Fund), 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.
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The financial statements for periods or years prior to May 31, 1999
(May 31, 1997 for the Pennsylvania Tax Exempt Bond Fund) with respect to the
Predecessor Funds, which are incorporated by reference in this Statement of
Additional Information, were audited by Coopers & Lybrand, L.L.P., independent
accountants for the Predecessor Funds 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 One Logan Square, 18th and Cherry Streets,
Philadelphia, Pennsylvania 19103-6996, are counsel to the Trust and will pass
upon the legality of the shares offered hereby. Squire, Sanders & Dempsey,
L.L.P. with offices at 4900 Key Center, 127 Public Square, Cleveland, Ohio
44114-1304 act as special Ohio tax counsel for the Trust and have reviewed the
sections of this Statement of Additional Information entitled "Special Risk
Considerations Regarding Investment in Ohio Municipal Securities."
YIELD AND PERFORMANCE INFORMATION
Each Fund's "yield" described in the Prospectus is calculated by
dividing the Fund's net investment income per share earned during a 30-day
period (or another period permitted by the rules of the SEC) by the net asset
value per share on the last day of the period and annualizing the result on a
semi-annual basis by adding one to the quotient, raising the sum to the power of
six, subtracting one from the result and then doubling the difference. The
Fund's net investment income per share earned during the period is based on the
average daily number of shares outstanding during the period entitled to receive
dividends and includes dividends and interest earned during the period minus
expenses accrued for the period, net of reimbursements. This calculation can be
expressed as follows:
a-b(6)
Yield = 2 [(------) - 1]
cd + 1
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = maximum offering price per share on the last day of
the period.
The Equity Income, Balanced Allocation, Total Return Advantage, Bond,
Intermediate Bond, GNMA, Enhanced Income, the Tax-Exempt Funds, Mid Cap Growth,
U.S. Government Income and the Michigan Tax Exempt Bond Funds calculate interest
earned on debt obligations held in their portfolios by computing the yield to
maturity of each obligation held by it
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based on the market value of the obligation (including actual accrued interest)
at the close of business on the last business day of each 30-day period, or,
with respect to obligations purchased during the 30-day period, the purchase
price (plus actual accrued interest) and dividing the result by 360 and
multiplying the quotient by the market value of the obligation (including actual
accrued interest) in order to determine the interest income on the obligation
for each day of the subsequent 30-day period that the obligation is in the Fund.
The maturity of an obligation with a call provision is the next call date on
which the obligation reasonably may be expected to be called or, if none, the
maturity date. With respect to debt obligations purchased by the Fund at a
discount or premium, the formula generally calls for amortization of the
discount or premium. The amortization schedule will be adjusted monthly to
reflect changes in the market values of such debt obligations.
Interest earned on tax-exempt obligations that are issued without
original issue discount and have a current market discount is calculated by
using the coupon rate of interest instead of the yield to maturity. In the case
of tax-exempt obligations that are issued with original issue discount but which
have discounts based on current market value that exceed the then-remaining
portion of the original issue discount (market discount), the yield to maturity
is the imputed rate based on the original issue discount calculation. On the
other hand, in the case of tax-exempt obligations that are issued with original
issue discount but which have discounts based on current market value that are
less than the then-remaining portion of the original issue discount (market
premium), the yield to maturity is based on the market value.
Expenses accrued for the period (variable "b" in the formula) include
all recurring fees charged by the Fund to all shareholder accounts in proportion
to the length of the base period and the Fund's mean (or median) account size.
Undeclared earned income will be subtracted from the net asset value per share
(variable "d" in the formula). Undeclared earned income is the net investment
income which, at the end of the 30-day base period, has not been declared as a
dividend, but is reasonably expected to be and is declared as a dividend shortly
thereafter. For applicable sales charges, see "How to Purchase and Redeem Shares
- -- Sales Charges Applicable to Purchases of A Shares" and "Sales Charges
Applicable to Purchases of B Shares" in the Prospectus.
The "tax-equivalent yield" is computed by dividing the portion of a
Fund's yield (calculated as above) that is exempt from federal income tax by one
minus a stated federal income tax rate and adding that figure to that portion,
if any, of the Fund's yield that is not exempt from federal income tax.
For the 30-day period ended May 31, 1999, the respective yields of the
A and I shares of the Ohio Tax Exempt, Pennsylvania Municipal and National Tax
Exempt Funds were: _____% and _____% ; _____% and _____%; and _____% and _____%,
respectively. The tax equivalent yields (assuming a 39.6% federal tax rate and
6.799% Ohio tax rate for 1998) for the Ohio Tax Exempt Bond Fund's A and I
shares for the same period were _____% and _____%, respectively. The tax
equivalent yields (assuming a 39.6% federal tax rate and a 2.8% Pennsylvania tax
rate) for the Pennsylvania Tax Exempt Bond Fund's A and I shares for the same
period were _____% and _____%, respectively. The tax equivalent yield (assuming
a 39.6% federal tax rate) for the National Tax Exempt Fund's I shares for the
same period was _____%.
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The average annual total returns for the Ohio Tax Exempt Bond Fund for
the one year period ending May 31, 1999 were _____% (after taking into account
the sales load) and _____% (without taking into account any sales load) for the
A shares and _____% for the I shares. The average annual total returns since the
Fund's commencement of operations through May 31, 1999 were _____% (after taking
into account the sales load) and _____% (without taking into account any sales
load) for the A shares and _____% for the I shares. The Ohio Tax Exempt Bond
Fund commenced investment operations on January 5, 1990.
The average annual total returns for the fiscal year ending May 31,
1999 for the Pennsylvania Tax Exempt Bond Fund were _____%, (after taking into
account the sales load) and _____% (without taking into account any sales load)
for the A shares and _____% for the I shares. The average annual total returns
since the predecessor fund to the Pennsylvania Tax Exempt Bond Fund's
commencement of operations through May 31, 1999 were _____% (after taking into
account the sales load) and _____% (without taking into account any sales load)
for the A shares and _____% for the I shares. The predecessor fund to the
Pennsylvania Tax Exempt Bond Fund commenced investment operations on August 10,
1994.
The average annual total return since the predecessor fund to the
National Tax Exempt Funds commencement of operations through May 31, 1999 was
_____% for the I shares. The predecessor fund to the National Tax Exempt
commenced investment operations on August 16, 1964.
For the 30-day period ended May 31, 1999, the yields of the A and I
shares of the International Equity, Small Cap Value, Small Cap Growth, Equity
Growth, Tax Managed Equity, Core Equity and Equity Income Funds were _____% and
_____%, _____% and _____%, ____% and _____%, _____% and _____%, _____%, and
_____%, _____% and _____%, _____% and _____%, respectively.
For the 30-day period ended May 31, 1999, the yields of the A and I
shares of the Total Return Advantage Fund, Bond, Intermediate Bond Fund, GNMA
Fund and Enhanced Income Fund were _____% and _____%; _____% and _____%; _____%,
and _____%; _____%, and _____%; and _____% and _____%, respectively.
For the 30-day period ended May 31, 1999, the yields of the B shares
of the Bond Fund and Intermediate Bond Fund were _____% and _____%,
respectively.
The current yield for each class of shares in the Treasury Plus Money
Market 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 Treasury Plus Money
Market Fund's expenses and the types of instruments held by the Fund.
Each Fund computes its "average annual total return" by determining
the average annual compounded rate of return during specified periods that would
equate the initial amount invested to the ending redeemable value of such
investment by dividing the ending redeemable value of a hypothetical $1,000
initial payment by $1,000 and raising the quotient to a power equal
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to one divided by the number of years (or fractional portion thereof) covered by
the computation and subtracting one from the result. This calculation can be
expressed as follows:
ERV 1/n
T = [(-----) - 1]
P
Where: T = average annual total return
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period
P = hypothetical initial payment of $1,000
n = period covered by the computation, expressed in terms
of years
Each Fund computes its aggregate total returns by determining the
aggregate rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
ERV
T = (---) - 1
P
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions
on the reinvestment dates during the period and include all recurring fees
charged to all shareholder accounts, assuming an account size equal to the
Fund's mean (or median) account size for any fees that vary with the size of the
account. The maximum sales load and other charges deducted from payments are
deducted from the initial $1,000 payment (variable "P" in the formula). The
ending redeemable value (variable "ERV" in the formula) is determined by
assuming complete redemption of the hypothetical investment and the deduction of
all contingent deferred sales charges and other nonrecurring charges at the end
of the measuring period covered by the computation.
The average annual total returns for the one year period ended May 31,
1999 were _____% (after taking the sales load into account) and _____% (without
taking into account any sales load), for the Small Cap Value Fund's A shares,
_____% (after taking the sales load into account) and _____% (without taking
into account any sales load) for its B shares and _____% for the Small Cap Value
Fund's I shares. The average annual total returns since the Small Cap Value
Fund's commencement of operations through May 31, 1999 were _____% (after taking
into account the sales load) and _____% (without taking into account any sales
load), for its A shares, _____% (after taking the sales load into account) and
_____% (without taking into account any sales load) for its B shares, and _____%
for the I shares.
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The average annual total returns for the one year period ending May
31, 1999 were _____% (after taking the sales load into account) and _____%
(without taking into account any sales load), for the Equity Growth Fund's A
Shares, _____% (after taking the sales load into account) and _____% (without
taking into account any sales load) for its B shares and _____% for the Equity
Growth Fund's I shares. The average annual total returns since the Equity Growth
Fund's commencement of operations through May 31, 1999 were _____% (after taking
into account the sales load) and _____% (without taking into account any sales
load), for its A shares, _____% (after taking the sales load into account) and
_____% (without taking into account any sales load) for its B shares, and _____%
for the I shares.
The average annual total returns for the one year period ended May 31,
1999 were _____% (after taking the sales load into account) and _____% (without
taking into account any sales load), for the Equity Income Fund's A shares,
_____% (after taking the sales load into account) and _____% (without taking
into account any sales load) for its B shares and _____% for the Equity Income
Fund's I shares. The average annual total returns since the Equity Income Fund's
commencement of operations through May 31, 1999 were _____% (after taking into
account the sales load) and _____% (without taking into account any sales load),
for its A shares, _____% (after taking the sales load into account) and _____%
(without taking into account any sales load) for its B shares, and _____% for
the I shares.
The average annual total returns for the Total Return Advantage Fund's
fiscal year ended May 31, 1999 were _____% (after taking the sales load into
account) and _____% (without taking into account any sales load) for its A
shares, and _____% for its I shares. The average annual total returns since the
Total Return Advantage Fund's commencement of May 31, 1999 were _____% (after
taking into account the sales load), and _____% (without taking into account any
sales load) for its A shares and _____% for its I shares. The A share class of
the Total Return Advantage Fund commenced operations on September 6, 1994 and
the I share class of the Total Return Advantage Fund commenced operations on
July 7, 1994.
The average annual total returns for the Bond Fund's fiscal year ended
May 31, 1999 were _____% (after taking the sales load into account) and _____%
(without taking into account any sales load) for its A shares and, _____% (after
taking the sales load into account) and _____% (without taking into account any
sales load) for its B shares and _____% for its I shares. The average annual
total returns since the Bond Fund's commencement of operations through May 31,
1999 were _____% (after taking into account the sales load) and _____% (without
taking into account any sales load) for its A shares, _____% (after taking the
sales load into account) and _____% (without taking into account any sales load)
for its B shares and _____% for its I shares. The Bond Fund commenced operations
on August 10, 1994.
The average annual total returns for the Intermediate Bond Fund's
fiscal year ended May 31, 1999 were _____% (after taking the sales load into
account) and _____% (without taking into account any sales load) for its A
shares, _____% (after taking the sales load into account) and _____% (without
taking into account any sales load) for its B shares and _____% for its I
shares. The average annual total returns since the Intermediate Bond Fund's
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commencement of operations through May 31, 1999 were _____% (after taking into
account the sales load) and _____% (without taking into account any sales load)
for its A shares, _____% (after taking the sales load into account) and _____%
(without taking into account any sales load) for its B shares, and _____% for
its I shares. The Intermediate Bond Fund commenced operations on December 20,
1989.
The average annual total returns for the GNMA Fund's ended May 31,
1999 were _____% (after taking the sales load into account) and _____% (without
taking into account any sales load) for its A shares and _____% for its I
shares. The average annual total returns since the GNMA Fund's commencement of
operations through May 31, 1999 were _____% (after taking into account the sales
load) and _____% (without taking into account any sales load) for its A shares
and _____% for its I shares. The GNMA Fund commenced operations on August 10,
1994.
The average annual total returns for the Enhanced Income Fund's fiscal
year ended May 31, 1999 were _____% (after taking the sales load into account)
and _____% (without taking into account any sales load) for its A shares and
_____% for its I shares. The average annual total returns since the Enhanced
Income Fund's commencement of operations through May 31, 1999 were _____% (after
taking into account the sales load) and _____% (without taking into account any
sales load) for its A shares and _____% for its I shares. The A share class of
the Enhanced Income Fund commenced operations on September 9, 1994 and the I
share class of the Enhanced Income Fund commenced operations on July 7, 1994.
The "tax-equivalent yield" is computed by dividing the portion of a
Fund's yield (calculated as above) that is exempt from federal income tax by one
minus a stated federal income tax rate and adding that figure to that portion,
if any, of the Fund's yield that is not exempt from federal income tax.
For the 30-day period ended May 31, 1999, the respective yields of the
A and I shares of the Ohio Tax Exempt, Pennsylvania Municipal and National Tax
Exempt Funds were: _____% and _____% ; _____% and _____%; and _____% and _____%,
respectively. The tax equivalent yields (assuming a 39.6% federal tax rate and
6.799% Ohio tax rate for 1998) for the Ohio Tax Exempt Bond Fund's A and I
shares for the same period were _____% and _____%, respectively. The tax
equivalent yields (assuming a 39.6% federal tax rate and a 2.8% Pennsylvania tax
rate) for the Pennsylvania Tax Exempt Bond Fund's A and I shares for the same
period were _____% and _____%, respectively. The tax equivalent yield (assuming
a 39.6% federal tax rate) for the National Tax Exempt Fund's I shares for the
same period was _____%.
The average annual total returns for the Ohio Tax Exempt Bond Fund for
the one year period ending May 31, 1999 were _____% (after taking into account
the sales load) and _____% (without taking into account any sales load) for the
A shares and _____% for the I shares. The average annual total returns since the
Fund's commencement of operations through May 31, 1999 were _____% (after taking
into account the sales load) and _____% (without taking into account any sales
load) for the A shares and _____% for the I shares. The Ohio Tax Exempt Bond
Fund commenced investment operations on January 5, 1990.
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The average annual total returns for the fiscal year ending May 31,
1999 for the Pennsylvania Tax Exempt Bond Fund were _____%, (after taking into
account the sales load) and _____% (without taking into account any sales load)
for the A shares and _____% for the I shares. The average annual total returns
since the predecessor fund to the Pennsylvania Tax Exempt Bond Fund's
commencement of operations through May 31, 1999 were _____% (after taking into
account the sales load) and _____% (without taking into account any sales load)
for the A shares and _____% for the I shares. The predecessor fund to the
Pennsylvania Tax Exempt Bond Fund commenced investment operations on August 10,
1994.
The average annual total return since the predecessor fund to the
National Tax Exempt Funds commencement of operations through May 31, 1999 was
_____% for the I shares. The predecessor fund to the National Tax Exempt
commenced investment operations on August 16, 1964.
The cumulative total returns for the period since commencement of
operations (August 1, 1997 with respect to A and I shares and January 6, 1998
with respect to B shares) until May 31, 1999 were _____% (after taking the sales
load into account) and _____% (without taking into account any sales load), for
the International Equity Fund's A shares, _____% (after taking the sales load
into account) and _____% (without taking into account any sales load) for its B
shares and _____% for the International Equity Fund's I shares.
The cumulative total returns for the period since commencement of
operations (August 1, 1997 with respect to A and I shares and January 6, 1998
with respect to B shares) until May 31, 1999 were _____% (after taking the sales
load into account) and _____% (without taking into account any sales load), for
the Small-Cap Growth Fund's A shares, _____% (after taking the sales load into
account) and _____% (without taking into account any sales load) for its B
shares and _____% for the Small-Cap Growth Fund I shares.
The cumulative total returns for the period since commencement of
operations (August 1, 1997 with respect to A and I shares and January 6, 1998
with respect to B shares) until May 31, 1999 were _____% (after taking the sales
load into account), and _____% (without taking into account any sales load) for
the Core Equity Fund's A shares, _____% (after taking the sales load into
account) and _____% (without taking into account any sales load) for its B
shares and _____% for the Core Equity Fund's I shares.
Each Fund may also advertise the "aggregate total return" for its
shares which is computed by determining the aggregate compounded rates of return
during specified periods that likewise equate the initial amount invested to the
ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
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ERV
Aggregate Total Return = [(------)] - 1
P
The above calculations are made assuming that (1) all dividends and
capital gain distributions are reinvested on the reinvestment dates at the price
per Share existing on the reinvestment date, (2) all recurring fees charged to
all shareholder accounts are included, and (3) for any account fees that vary
with the size of the account, a mean (or median) account size in a Fund during
the periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.
The Mid Cap Growth, U.S. Government Income and Michigan Tax Exempt
Bond Funds may from time to time include in Materials a total return figure that
is not calculated according to the formulas set forth above in order to compare
more accurately a Fund's performance with other measures of investment return.
For example, in comparing a Fund's total return with data published by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger
Investment Company Service, or with the performance of an index, a Fund may
calculate its aggregate total return for the period of time specified in the
advertisement or communication by assuming the investment of $10,000 in shares
and assuming the reinvestment of each dividend or other distribution at net
asset value on the reinvestment date. Percentage increases are determined by
subtracting the initial value of the investment from the ending value and by
dividing the remainder by the beginning value. Each Fund does not, for these
purposes, deduct from the initial value invested or the ending value redeemed
any amount representing sales charges. A Fund will, however, disclose the
maximum sales charge and will also disclose that the performance data do not
reflect sales charges and that inclusion of sale charges would reduce the
performance quoted.
The 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's investments
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 a Fund's investments would
increase more quickly than if dividends or other distributions had been paid in
cash.
In addition, a Fund may also include in Materials discussions and/or
illustrations of the potential investment goals of a prospective investor,
investment management strategies, techniques, policies or investment suitability
of the Fund, high-quality investments, economic conditions, the relationship
between sectors of the economy and the economy as a whole, various securities
markets, the effects of inflation and historical performance of various asset
classes, including but not limited to, stocks, bonds and Treasury securities.
From time to time, Materials may summarize the substance of information
contained in shareholder reports (including the investment composition of 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,
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<PAGE>
investment strategies and related matters believed to be of relevance to a Fund.
Each Fund may also include in Materials charts, graphs or drawings which compare
the investment objective, return potential, relative stability and/or growth
possibilities of the Fund and/or other mutual funds, or illustrate the potential
risks and rewards of investment in various investment vehicles, including but
not limited to, stocks, bonds, Treasury securities and shares of the Fund and/or
other mutual funds. Materials may include a discussion of certain attributes or
benefits to be derived by an investment in a Fund and/or other mutual funds
(such as value investing, market timing, dollar cost averaging, asset
allocation, constant ratio transfer, automatic accounting rebalancing, the
advantages and disadvantages of investing in tax-deferred and taxable
investments), shareholder profiles and hypothetical investor scenarios, timely
information on financial management, tax and retirement planning and investment
alternatives to certificates of deposit and other financial instruments. Such
Materials may include symbols, headlines or other material which highlight or
summarize the information discussed in more detail therein.
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 Ohio Municipal, Pennsylvania Tax Exempt and Tax Exempt 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, 1999, the yields of the A and I
shares of the Pennsylvania Tax Exempt Fund, Tax Exempt Fund, Money Market Fund,
Government Fund and Treasury Fund were _____% and _____%, _____% and _____%,
_____% and _____%, _____% and _____%, and _____% and _____%, respectively, and
their respective effective yields
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were _____% and _____%, _____% and _____%, _____% and _____%, _____% and _____%,
and _____% and _____%, respectively. For the seven-day period ended May 31,
1999, the yield of the B shares of the Money Market Fund was _____%.
For the Pennsylvania Tax Exempt and 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 A and I shares for the seven-day period ended May 31,
1999 were _____% and _____%, and _____% and _____%, 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
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.
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<TABLE>
<CAPTION>
Aggregate Aggregate Total
Total Return Return From
From Inception Through
Inception 5/31/99 (without
Through Deduction for Any
5/31/99 (with Sales Charge)
Deduction of -------------
Maximum Sales Inception
Charge) Date
------- ----
<S> <C> <C> <C>
Armada International Equity Fund
Class A _____% _____% 8/01/97
Class I N/A _____% 8/01/97
B Shares _____% _____% 01/06/98
Armada Small Cap Value Fund
Class A _____% _____% 08/15/94
Class I N/A _____% 07/26/94
B Shares _____% _____% 01/06/98
Armada Small Cap Growth Fund
Class A _____% _____% 8/01/97
Class I N/A _____% 8/01/97
B Shares _____% _____% 01/06/98
Armada Equity Growth Fund
Class A _____% _____% 4/15/91
Class I N/A _____% 12/20/89
B Shares _____% _____% 01/06/98
Armada Equity Income Fund
Class A _____% _____% 8/22/94
Class I N/A _____% 07/01/94
B Shares _____% _____ 01/06/98
Armada Core Equity Fund
Class A _____% _____% 8/01/97
Class I N/A _____% 8/01/97
B Shares _____% _____% 01/06/98
Armada Balanced Allocation Fund
Class A N/A N/A 7/10/98
Class I N/A N/A
B Shares N/A N/A
Armada Total Return Advantage Fund
Class A _____% _____% 09/06/94
Class I N/A N/A 07/07 /A
B Shares N/A N/A N/A
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Armada Bond Fund
Class A _____% _____% 09/11/96
Class I N/A _____% 08/10/94
B Shares _____% _____% 01/06/98
Armada Intermediate Bond Fund
Class A _____% _____% 04/15/91
Class I N/A _____% 12/20/89
B Shares _____% _____% 1/06/98
Armada GNMA Fund
Class A _____% _____% 9/11/96
Class I N/A _____% 8/10/94
B Shares N/A N/A N/A
Armada Enhanced Income Fund
Class A _____% _____% 09/09/94
Class I N/A _____% 07/07/94
B Shares N/A N/A N/A
Armada Ohio Tax Exempt Bond Fund
Class A _____% _____% 04/15/91
Class I N/A _____% 01/05/90
B Shares N/A N/A
Armada Pennsylvania Municipal Bond
Fund
Class A _____% _____% 09/11/96
Class I N/A _____% 08/10/94
B Shares N/A N/A
</TABLE>
The Funds may also from time to time include in Materials a total
return figure that is not calculated according to the formulas set forth above
in order to compare more accurately a Fund's performance with other measures of
investment return. For example, in comparing the Fund's total return with data
published by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc.
or Weisenberger Investment Company Service, or with the performance of an index,
the Fund may calculate its aggregate total return for the period of time
specified in the advertisement or communication by assuming the investment of
$10,000 in shares and assuming the reinvestment of each dividend or other
distribution at net asset value on the reinvestment date. Percentage increases
are determined by subtracting the initial value of the investment from the
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ending value and by dividing the remainder by the beginning value. The Fund does
not, for these purposes, deduct from the initial value invested or the ending
value redeemed any amount representing sales charges. The Fund will, however,
disclose the maximum sales charge and will also disclose that the performance
data do not reflect sales charges and that inclusion of sale charges would
reduce the performance quoted.
The 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 the Fund investment are
reinvested by being paid in additional Fund shares, any future income or capital
appreciation of the Fund would increase the value, not only of the original Fund
investment, but also of the additional Fund shares received through
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distributions had been paid in cash.
In addition, the 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 the Fund, high-quality investments, economic conditions, the
relationship between sectors of the economy and the economy as a whole, various
securities markets, the effects of inflation and historical performance of
various asset classes, including but not limited to, stocks, bonds and Treasury
securities. From time to time, Materials may summarize the substance of
information contained in shareholder reports (including the investment
composition of the Fund), as well as the views of the adviser as to current
market, economic, trade and interest rate trends, legislative, regulatory and
monetary developments, investment strategies and related matters believed to be
of relevance to the Fund. The Fund may also include in Materials charts, graphs
or drawings which compare the investment objective, return potential, relative
stability and/or growth possibilities of the Fund and/or other mutual funds, or
illustrate the potential risks and rewards of investment in various investment
vehicles, including but not limited to, stocks, bonds, Treasury securities and
shares of the Fund and/or other mutual funds. Materials may include a discussion
of certain attributes or benefits to be derived by an investment in the Fund
and/or other mutual funds (such as value investing, market timing, dollar cost
averaging, asset allocation, constant ratio transfer, automatic accounting
rebalancing, the advantages and disadvantages of investing in tax-deferred and
taxable investments), shareholder profiles and hypothetical investor scenarios,
timely information on financial management, tax and retirement planning and
investment alternatives to certificates of deposit and other financial
instruments. Such Materials may include symbols, headlines or other material
which highlight or summarize the information discussed in more detail therein.
MISCELLANEOUS
The Trust bears all costs in connection with its organization,
including the fees and expenses of registering and qualifying its shares for
distribution under federal and state securities regulations. All organization
expenses are being amortized on the straight-line method over a period of five
years from the date of commencement of operations. With respect to the Money
Market, Government, Treasury, Tax Exempt and Pennsylvania Tax Exempt Funds, all
organization
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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 the Fund" means the
consideration received by the Trust upon the issuance of shares in that Fund,
together with all income, earnings, profits, and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds, and a
portion of any general assets of the Trust not belonging to the Fund. In
determining the Fund's net asset value, assets belonging to a Fund are charged
with the liabilities in respect of that Fund.
As of September 3, 1999, the following bank subsidiaries of National City
Corporation held of record 5% or more of the outstanding I 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:
PERCENTAGE OF OUTSTANDING
I SHARES
<TABLE>
<CAPTION>
Pennsylvania Government Treasury
Tax Money Tax Money Money
Exempt Market Exempt Market Market
Fund Fund Fund Fund Fund
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
National City Bank, N/A N/A _____% N/A N/A
Northeast
One Cascade Plaza
Akron, OH 44308
National City Bank of Dayton N/A N/A N/A _____% N/A
Gem Plaza, 6 N. Main
Dayton, OH 45412
National Bank of Columbus N/A _____% _____% _____% N/A
155 East Broad Street
Columbus, OH 43251
National City Bank of Kentucky _____% _____% N/A _____% N/A
National City Tower
101 South Fifth Street
Louisville, KY 40202
National City Bank of Indiana _____% _____% _____% _____% N/A
101 W. Washington Street
Indianapolis, IN 46255
National City Bank, Northwest _____% N/A N/A N/A N/A
405 Madison Avenue
Toledo, OH 43603
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National City Bank of Pennsylvania _____% _____% _____% N/A _____%
400 Fourth Avenue
Pittsburgh, PA 15222
National City Trust Co. N/A N/A N/A N/A N/A
1401 Forum Way, Suite 503
West Palm Beach, FL 33401
National City Bank, Cleveland _____% ______% _____% _____% N/A
1900 East Ninth Street
Cleveland, OH 44114
</TABLE>
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<PAGE>
As of _____________, 1999, the following persons owned of record 5
percent or more of the shares of the Funds of the Trust:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND (A)
<S> <C> <C>
OUTSTANDING SHARES PERCENTAGE
Wheat First Securities, Inc. _______________ _______________%
9912 Young Road
Wattsburg, PA 16442-9529
INTERNATIONAL EQUITY FUND (B)
OUTSTANDING SHARES PERCENTAGE
Wheat, First Securities _______________ _______________%
1190 Parkside Drive
Limestone, NY 14753-9704
SEI Investments Co. _______________ _______________%
Attn: Rob Silvestri
One Freedom Valley Drive
Oaks, PA 19456
INTERNATIONAL EQUITY FUND (I)
OUTSTANDING SHARES PERCENTAGE
National City Non-Contributory Retirement Trust _______________ _______________%
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Whitelaw & Co. _______________ _______________%
c/o National City
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Whitelaw & Co. _______________ _______________%
c/o National City
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
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<PAGE>
National City Bank _______________ _______________%
Sheldon & Co. Pathway - 49
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
SMALL CAP VALUE FUND (A)
OUTSTANDING SHARES PERCENTAGE
Citicorp USA, Inc. _______________ _______________%
As Custodian for Marlboro
Equity Partners
One Sansome St., 24th Floor
San Francisco, CA 94104-4448
Citicorp USA Inc. _______________ _______________%
As Custodian for Suzanne Tito
One Sansome Street, 24th Floor
San Francisco, CA 94104-4448
SMALL CAP VALUE FUND (B)
OUTSTANDING SHARES PERCENTAGE
Wheat, First Securities, Inc. _______________ _______________%
John K. Wojchowski IRA
WFS AS Custodian
Box 48, West Street
Mount Pleasant, OH 43939-0048
Wheat, First Securities, Inc. _______________ _______________%
1190 Parkside Drive
Limestone, NY 14753-9704
Wheat, First Securities, Inc. _______________ _______________%
Daniel P. Schultz IRA
WFS AS Custodian
7917 Conifer Drive
Louisville, KY 40258-2236
Wheat, First Securities, Inc. _______________ _______________%
1016 Westgate Place
Louisville, KY 40207-2327
Wheat, First Securities, Inc. _______________ _______________%
8123 Shobe Lane
Louisville, KY 40228-2274
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<PAGE>
SMALL CAP VALUE FUND (I)
OUTSTANDING SHARES PERCENTAGE
Sheldon & Co. _______________ _______________%
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. _______________ _______________%
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
c/o National City Bank _______________ _______________%
Sheldon & Co. - Pathway 49
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. _______________ _______________%
C/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
National City Bank, Whitelaw & Co. _______________ _______________%
Daily Valuation Account
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
SMALL CAP GROWTH FUND (A)
OUTSTANDING SHARES PERCENTAGE
Capital Network Services _______________ _______________%
One Bush Street, 11th Floor
San Francisco, CA 94104-4425
Schweizer Dipple Inc. (401k Plan) _______________ _______________%
James G. Dwyer
Attn: Lynn E. Ulrich
7227 Division Street
Oakwood Village, OH 44146-5405
Schweizer Dipple Inc. (401k Plan) _______________ _______________%
James G. Dwyer
Attn: Lynn E. Ulrich
7227 Division Street
Oakwood Village, OH 44146-5405
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<PAGE>
SMALL CAP GROWTH FUND (B)
OUTSTANDING SHARES PERCENTAGE
SEI Investments Co. _______________ _______________%
Attn: Rob Silvestri
One Freedom Valley Drive
Oaks, PA 19456
SMALL CAP GROWTH FUND (I)
OUTSTANDING SHARES PERCENTAGE
National City Corporation Non-Contributory _______________ _______________%
Retirement Trust
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Whitelaw & Co. _______________ _______________%
C/o National City
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Whitelaw & Co. _______________ _______________%
C/o National City
Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank _______________ _______________%
Sheldon & Co. Pathway-49
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Whitelaw & Co. _______________ _______________%
C/o National City
Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
EQUITY GROWTH FUND (A)
OUTSTANDING SHARES PERCENTAGE
-127-
<PAGE>
State Street Bank & Trust _______________ _______________%
FBO First Energy Corp.
Savings Plan
200 Newport Avenue
North Quincey, MA 02171
EQUITY GROWTH FUND (B)
OUTSTANDING SHARES PERCENTAGE
Wheat, First Securities, Inc. _______________ _______________%
1190 Parkside Drive
Limestone, NY 14753-9704
Wheat, First Securities, Inc. _______________ _______________%
12435 Pearl Road
Chardon, OH 44024-9125
Wheat, First Securities, Inc. _______________ _______________%
John K. Wojchowski IRA
Box 48 West Street
Mt. Pleasant, OH 43939-0048
Wheat, First Securities, Inc. _______________ _______________%
1016 Westgate Place
Louisville, KY 40207-2327
EQUITY GROWTH FUND (I)
OUTSTANDING SHARES PERCENTAGE
Whitelaw & Co. _______________ _______________%
Daily Valuation Acct.
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. _______________ _______________%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Whitelaw & Co. _______________ _______________%
c/o National City Bank
Trust Mutual Funds/Pooled
Fund Conversion
P.O. Box 94984
Cleveland, OH 44101-4984
-128-
<PAGE>
National City Non-Contributing Retirement Trust _______________ _______________%
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
National City Bank _______________ _______________%
Sheldon & Co. Pathway - 49
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
TAX MANAGED EQUITY FUND (A)
OUTSTANDING SHARES PERCENTAGE
Wheat, First Securities, Inc. _______________ _______________%
130 Penn Street
New Bethlehem, PA 16242-1042
Robert Thomas Securities _______________ _______________%
Attn: Mutual Funds Transfer
880 Carillon Parkway
St. Petersburg, FL 33733
Tracy L. Sambuco, Custodian _______________ _______________%
Austin P. Sambuco, UTMA-OH
48970 Cadiz Harrisville Rd.
Cadiz, OH 43907-9707
Wheat, First Securities Inc. _______________ _______________%
1717 Tenth Street
Cuyahoga Falls, OH 44221-4511
TAX MANAGED EQUITY FUND (B)
OUTSTANDING SHARES PERCENTAGE
Wheat, First Securities, Inc. _______________ _______________%
6706 Old Healey Road
Louisville, KY 40299-5206
Wheat, First Securities, Inc. _______________ _______________%
Anna M. Kusner
3501 Executive Parkway
Apt. 729
Toledo, OH 43606-5523
-129-
<PAGE>
Wheat, First Securities, Inc. _______________ _______________%
Indar M. Jhamb MD. PSP & TR
Indar M. Jhamb MD. TTEE
FBO Indarr M. Jhamb MD.
1228 Ashley Circle
Wheat, First Securities, Inc. _______________ _______________%
Lois S. Wood
266 Windemere Place
Westerville, OH 43082-6349
Wheat, First Securities, Inc. _______________ _______________%
10 Jordan Drive
Norwich, OH 43767-9770
Wheat, First Securities, Inc. _______________ _______________%
19645 Detroit Rd., Box 238
Rocky River, OH 44116-1811
Wheat, First Securities, Inc. _______________ _______________%
Linda D. Musick
Lisa A. Skaggs
2779 Stuart Road
Rockbridge, OH 43149
TAX MANAGED EQUITY FUND (I)
OUTSTANDING SHARES PERCENTAGE
Sheldon & Co. _______________ _______________%
C/o National City Bank
Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
CORE EQUITY FUND (A)
OUTSTANDING SHARES PERCENTAGE
Wheat First FBO _______________ _______________%
Vincent A. DiGirolamo &
Nancy S. DiGirolamo
2002 Fox Trace Trail
Cuyahoga Falls, OH 44223-3738
Charles W. Edwards, Jr. _______________ _______________%
570 Bennett Way
Florence, AL 35634-2604
-130-
<PAGE>
Wheat First Securities, Inc. _______________ _______________%
FBO Everette M. Bride
RD #1 Box 155 B1
SEI Trust Company for the _______________ _______________%
Rollover of Macklin H. Thomas
2418 E. 91st Street
Indianapolis, IN 46240-2010
Wheat, First Securities, Inc. _______________ _______________%
122 Oberlin Dr.
Butler, PA 16001-1710
Wheat, First Securities, Inc. _______________ _______________%
Erskine X-Press Inc.
John R. Swab, Sr.
6210 Center Road
Lowellville, OH 44436-9521
CORE EQUITY FUND (B)
OUTSTANDING SHARES PERCENTAGE
Richard P. Nover _______________ _______________%
Kathleen Cain Nover
3146 Sable Ridge Place
Greenwood, IN 46142-9773
James H. Turner _______________ _______________%
137 Vanderbilt Drive
Lexington, KY 40517-1540
SEI Trust Company _______________ _______________%
Custodian for the IRA of
Jack Lewis
10099 Meadville St., Lot 31
Cranesville, PA 16410-9331
SEI Investments Co. _______________ _______________%
Attn: Rob Silvestri
One Freedom Valley Drive
Oaks, PA 19456
Wheat, First Securities, Inc. _______________ _______________%
802 Broad Street
New Bethlehem, PA 16242-1108
CORE EQUITY FUND (I)
OUTSTANDING SHARES PERCENTAGE
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<PAGE>
National City Non-Contributory Retirement Trust _______________ _______________%
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
EQUITY INDEX FUND (I)
OUTSTANDING SHARES PERCENTAGE
Whitelaw & Co. _______________ _______________%
Daily Valuation Account
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Whitelaw & Co. _______________ _______________%
C/o National City Bank
Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Whitelaw & Co. - Voyage _______________ _______________%
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
EQUITY INCOME FUND (B)
OUTSTANDING SHARES PERCENTAGE
Wheat, First Securities, Inc. _______________ _______________%
1190 Parkside Drive
Limestone, NY 14753-9704
Wheat, First Securities, Inc. _______________ _______________%
12435 Pearl Road
Chardon, OH 44024-9125
Wheat, First Securities, Inc. _______________ _______________%
4314 Churchill Rd.
Louisville, KY 40207-4047
Wheat, First Securities, Inc. _______________ _______________%
72 Birchwood Drive
Transfer, PA 16154-2406
EQUITY INCOME FUND (I)
-132-
<PAGE>
OUTSTANDING SHARES PERCENTAGE
Sheldon & Co. _______________ _______________%
C/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
C/o National City Bank _______________ _______________%
Sheldon & Co. - Pathway - 49
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
National City Bank, Cleveland Non-Contributory _______________ _______________%
Retirement Trust
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
BALANCED ALLOCATION FUND (A)
OUTSTANDING SHARES PERCENTAGE
Wheat, First Securities, Inc. _______________ _______________%
908 Aetna Drive
Ellwood City, PA 16117-1410
Wheat, First Securities, Inc. _______________ _______________%
308 Division Avenue
Ellwood City, PA 16117-2209
Wheat, First Securities, Inc. _______________ _______________%
P.O. Box 194, Route 18
Wampum, PA 16157-0194
BALANCED ALLOCATION FUND (I)
OUTSTANDING SHARES PERCENTAGE
Whitelaw & Co. _______________ _______________%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
-133-
<PAGE>
Whitelaw & Co. _______________ _______________%
Daily Valuation Acct.
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
TOTAL RETURN ADVANTAGE FUND (A)
OUTSTANDING SHARES PERCENTAGE
Fifth Third Bank _______________ _______________%
P.O. Box 630074
Cincinnati, OH 45263-0778
Fifth Third Bank _______________ _______________%
P.O. Box 630074
Cincinnati, OH 45263-0778
TOTAL RETURN ADVANTAGE FUND (I)
OUTSTANDING SHARES PERCENTAGE
Sheldon & Co. _______________ _______________%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. _______________ _______________%
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
Sheldon & Co. _______________ _______________%
C/o National City Bank
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
BOND FUND (A)
OUTSTANDING SHARES PERCENTAGE
Wheat First Union _______________ _______________%
FBO Benjamin Kimmel IRA
c/o National City
10700 North Park Drive
Glen Allen, VA 23060-9243
-134-
<PAGE>
Wheat, First Securities, Inc. _______________ _______________%
Anna M. Kusner
3501 Executive Parkway
Apt. 729
Toledo, OH 43606-5523
Wheat, First Securities, Inc. _______________ _______________%
9912 Young Road
Wattsburg, PA 16442-9529
Wheat, First Securities, Inc. _______________ _______________%
James R. Luke
62 North Lake Street
North East, PA 16428-1321
Wheat, First Securities, Inc. _______________ _______________%
7041 Truck World Blvd.
Hubbard, OH 44425-3254
BOND FUND (B)
OUTSTANDING SHARES PERCENTAGE
Wheat, First Securities, Inc. _______________ _______________%
1190 Parkside Drive
Limestone, NY 14753-9704
Wheat First Securities, Inc. _______________ _______________%
4314 Churchill Rd.
Louisville, KY 40207-4047
BOND FUND (I)
OUTSTANDING SHARES PERCENTAGE
Sheldon & Co. _______________ _______________%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
National City Bank _______________ _______________%
Sheldon & Co. Pathway 49
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
-135-
<PAGE>
Whitelaw & Co. _______________ _______________%
Daily Valuation Acct.
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Whitelaw & Co. _______________ _______________%
c/o National City Bank
Trust Mutual Funds/Pooled
Fund Conversion
P.O. Box 94984
Cleveland, OH 44101-4984
INTERMEDIATE BOND FUND (A)
OUTSTANDING SHARES PERCENTAGE
Wheat, First Securities, Inc. _______________ _______________%
Brandon G. Schnorf
5217 Monroe Street
Suite A
Toledo, OH 43623-4604
Wheat, First FBO Mary M. _______________ _______________%
Montgomery IRA
603 East 8th Street
Port Clinton, OH 43452-2014
Wheat, First FBO Marian L. Crayne, IRA _______________ _______________%
5139 Jolly Road
Sylvania, OH 43560-9711
INTERMEDIATE BOND FUND (B)
OUTSTANDING SHARES PERCENTAGE
SEI Investments Co. _______________ _______________%
Attn: Rob Silvestri
One Freedom Valley Drive
Oaks, PA 19456
SEI Trust Company _______________ _______________%
Custodian for the IRA
Of Roger J. Thompson
25645 Buena Vista Road
Rockbridge, OH 43149-9507
INTERMEDIATE BOND FUND (I)
-136-
<PAGE>
OUTSTANDING SHARES PERCENTAGE
SEI Trust Company _______________ _______________%
Attn: Mutual Fund Administrator
One Freedom Valley Drive
Oaks, PA 19456
GNMA FUND (A)
OUTSTANDING SHARES PERCENTAGE
Schweizer Dipple Inc. _______________ _______________%
401(k) Plan
Dennis J. Clark, Sr.
Attn: Lynn E. Ulrich
7227 Division Street
Oakwood Village, OH 44146-5405
Wheat First Union _______________ _______________%
FBO Benjamin Kimmel IRA
c/o Nat City
10700 North Park Drive
Glen Allen, VA 23060-9243
GNMA FUND (I)
OUTSTANDING SHARES PERCENTAGE
National City Bank _______________ _______________%
Sheldon & Co. Pathay-49
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
ENHANCED INCOME FUND (A)
OUTSTANDING SHARES PERCENTAGE
David T. Olsen & Ann M. Olsen _______________ _______________%
2914 Dark Branch Road
Fayetteville, NC 28304-3717
Wheat First FBO Eleanor D. _______________ _______________%
Hendershot IRA
351 Buckeye Drive
Berea, OH 44017-1303
-137-
<PAGE>
Wheat First FBO Harvey M. Brunner, Jr. IRA _______________ _______________%
700 Brick Mill Run, Apt. 106
Westlake, OH 44145-1655
ENHANCED INCOME FUND (I)
OUTSTANDING SHARES PERCENTAGE
Key Trust Company _______________ _______________%
FBO St. Luke's Self Ins.
P.O. Box 94871
Cleveland, OH 44101-4871
Sheldon & Co. _______________ _______________%
Future Quest
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. _______________ _______________%
Future Quest
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
c/o National City Bank _______________ _______________%
Sheldon & Co.-Pathway 49
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
OHIO TAX EXEMPT BOND FUND (A SHARES)
OUTSTANDING SHARES PERCENTAGE
Wheat First FBO David J. _______________ _______________%
Beverly & Pamela C. Beverly
1128 Laguna Drive
Huron, OH 44839-2605
Wheat First Securities, Inc. _______________ _______________%
FBO Edward B. Brandon &
-138-
<PAGE>
Phyllis P. Brandon
Lakepoint Office Park
3201 Enterprise Parkway
Suite 470
Beachwood, OH 44122-7320
OHIO TAX EXEMPT BOND FUND (I SHARES)
OUTSTANDING SHARES PERCENTAGE
Sheldon and Co. (Cash) _______________ _______________%
National City Bank
Trust Mutual Funds-5312
P.O. Box 94984
Cleveland, OH 44101-4984
PENNSYLVANIA TAX EXEMPT BOND FUND (A SHARES)
OUTSTANDING SHARES PERCENTAGE
Helen M. Weyer _______________ _______________%
James N. Weyer
2600 Mohawk Drive
White Oak, PA 15131-3121
Robert H. Rhone _______________ _______________%
C/O Michael Rhone
P.O. Box 175
Rew, PA 16744-0175
Wheat, First Securities, Inc. _______________ _______________%
304 Michigan Avenue
Lower Burrell, PA 15068-2936
PENNSYLVANIA TAX EXEMPT BOND FUND (I SHARES)
OUTSTANDING SHARES PERCENTAGE
National City Bank _______________ _______________%
Sheldon & Co. Pathway-49
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
NATIONAL TAX EXEMPT FUND (A SHARES)
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<PAGE>
OUTSTANDING SHARES PERCENTAGE
JJB Hilliard WL Lyons, Inc. _______________ _______________%
Frederick W. Krieg
Attn: James H. Watson MSO4
120 Hilliard Lyons Center
Louisville, KY 40202
NATIONAL TAX EXEMPT FUND (I SHARES)
OUTSTANDING SHARES PERCENTAGE
Sheldon & Co. _______________ _______________%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND (A )
OUTSTANDING SHARES PERCENTAGE
FBO Corporate Autosweep Customers _______________ _______________%
c/o National City Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15278-0001
National City Bank of Pennsylvania _______________ _______________%
FBO PCG/Retail Sweep Customers
Cash Management Operations
770 W. Broad Street 16-0347
Columbus, OH 43222-1419
PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND (I )
OUTSTANDING SHARES PERCENTAGE
National City Bank _______________ _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
TAX EXEMPT MONEY MARKET FUND (A )
OUTSTANDING SHARES PERCENTAGE
Wheat First Securities _______________ _______________%
P.O. Box 6629
-140-
<PAGE>
Glen Allen, VA 23058-6629
National City Bank _______________ _______________%
FBO PCG/Retail Sweep Customers
770 W. Broad Street, Location 16-0347
Columbus, OH 43222-1419
TAX EXEMPT MONEY MARKET FUND (I )
OUTSTANDING SHARES PERCENTAGE
National City Bank _______________ _______________%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________ _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland,, OH 44135-1389
National City Bank _______________ _______________%
Operations Center
Attn: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________ _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________ _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
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<PAGE>
MONEY MARKET FUND (A)
OUTSTANDING SHARES PERCENTAGE
Wheat First Securities _______________ _______________%
P.O. Box 6629
Glen Allen, VA 23058-6629
FBO Corporate Autosweep Customers _______________ _______________%
c/o National City Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15278-0001
National City Bank _______________ _______________%
FBO PCG/Retail Sweep Customer
770 W. Broad St. Location 16-0347
Columbus, OH 43222-1419
MONEY MARKET FUND (B)
OUTSTANDING SHARES PERCENTAGE
SEI Trust Company _______________ _______________%
Custodian for the IRA Rollover
of Robert W. Best
6518 Calais Circle
Indianapolis, IN 46220
SEI Trust Company _______________ _______________%
Custodian for the IRA of Jack Lewis
10099 Meadville Street, Lot 31
Cranesville, PA 16410-9331
MONEY MARKET FUND (I )
OUTSTANDING SHARES PERCENTAGE
National City Bank _______________ _______________%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________ _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
-142-
<PAGE>
National City Bank _______________ _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________ _______________%
Operations Center
Attn: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________ _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
Whitelaw & Co. _______________ _______________%
Daily Valuation Account - Disc.
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
GOVERNMENT MONEY MARKET FUND (A)
OUTSTANDING SHARES PERCENTAGE
FBO Corporate Autosweep Customers _______________ _______________%
c/o National City Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15278-0001
Wheat First Securities _______________ _______________%
P.O. Box 6629
Glen Allen, VA 23058-6629
GOVERNMENT MONEY MARKET FUND (I )
OUTSTANDING SHARES PERCENTAGE
National City Bank _______________ _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 West 150th Street
Cleveland, OH 44135-1389
-143-
<PAGE>
National City Bank _______________ _______________%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________ _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________ _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________ _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________ _______________%
Operations Center
Attn: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
TREASURY MONEY MARKET FUND (A )
OUTSTANDING SHARES PERCENTAGE
Triple S Plastics Georgetown _______________ _______________%
Cont. Fund
Attn: John Crandle, Commercial Loans
108 E. Michigan Avenue
Kalamazoo, MI 49007-3966
Wheat First Securities _______________ _______________%
P.O. Box 6629
Glen Allen, VA 23058-6629
Warner Theatre Preservation _______________ _______________%
Trust Corp.
-144-
<PAGE>
P.O. Box 1645
Erie, PA 16507-0645
National City Bank _______________ _______________%
FBO PCG/Retail Sweep Customers
770 W. Broad St. Location 16-0347
Columbus, OH 43222-1419
AFSCME Benefit Trust _______________ _______________%
P.O. Box 845
Springfield, IL 62705-0845
TREASURY MONEY MARKET FUND (I )
OUTSTANDING SHARES PERCENTAGE
National City Bank _______________ _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________ _______________%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________ _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________ _______________%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank _______________ _______________%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
</TABLE>
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<PAGE>
FINANCIAL STATEMENTS
The audited financial statements contained in the annual report to
shareholders for the fiscal year ended May 31, 1999 are hereby incorporated
herein by reference. Copies of the Funds' annual report may be obtained by
calling the Trust at 1-800-622-FUND (3863) or by writing to the Trust, One
Freedom Valley Drive, Oaks, Pennsylvania 19456.
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<PAGE>
APPENDIX A
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - This designation represents the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded as having
significant speculative characteristics. "BB" indicates the least degree of
speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
"BB" - Debt is less vulnerable to non-payment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
"B" - Debt is more vulnerable to non-payment than obligations rated
"BB", but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial or economic conditions
will likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
"CCC" - Debt is currently vulnerable to non-payment, and is dependent
upon favorable business, financial and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
"CC" - An obligation rated "CCC" is currently highly vulnerable to
non-payment.
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"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
"D" - An obligation rated "D" is in payment default. This rating is
used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon the
filing of a bankruptcy petition or the taking of similar action if payments on
an obligation are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid, and
certain other obligations that S & P believes may experience high volatility or
high variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an "r"
symbol should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds are considered as medium-grade obligations, (i.e., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable
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<PAGE>
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
(P)... - When applied to forward delivery bonds, indicates that the
rating is provisional pending delivery of the bonds. The rating may be revised
prior to delivery if changes occur in the legal documents or the underlying
credit quality of the bonds.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols, Aa1, A1, Baa1, Ba1 and B1.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt rated
"B" possesses the risk that obligations will not be met when due. Debt rated
"CCC" is well below investment grade and has considerable
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<PAGE>
uncertainty as to timely payment of principal, interest or preferred dividends.
Debt rated "DD" is a defaulted debt obligation, and the rating "DP" represents
preferred stock with dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the ratings used by Fitch for corporate and
municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-1+."
"A" - Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
"BB" - Bonds considered to be speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified, which
could assist the obligor in satisfying its debt service requirements.
"B" - Bonds are considered highly speculative. While securities in
this class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
"CCC" - Bonds have certain identifiable characteristics that, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
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<PAGE>
"CC" - Bonds are minimally protected. Default in payments of interest
and/or principal seems probable over time.
"C" - Bonds are in imminent default in payment of interest or
principal.
"DDD," "DD" and "D" - Bonds are in default on interest and/or
principal payments. Such securities are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. "DDD" represents the highest potential for
recovery on these securities, and "D" represents the lowest potential for
recovery.
To provide more detailed indications of credit quality, the Fitch
ratings from and including "AA" to "C" may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major rating
categories.
IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions may increase investment risk, albeit not very significantly.
"A" - Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic or financial conditions may lead
to increased investment risk.
"BBB" - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial conditions
are more likely to lead to increased investment risk than for obligations in
other categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one of
these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree of
speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating below
"AAA" to denote relative status within major rating categories.
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<PAGE>
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes the
rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
COMMERCIAL PAPER RATINGS
A Standard & Poor's ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. The following summarizes the rating
categories used by Standard and Poor's for commercial paper:
"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category,
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<PAGE>
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 in
higher rating categories. 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 upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the 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 Standard & Poor's believes that
such payments will be made during such grace period. The "D" rating will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
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,
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<PAGE>
may be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effects of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch 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:
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"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 the higher ratings.
"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 financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.
"C" - Securities possess high default risk. This designation indicates
that default is a real possibility and 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 Financial 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 Financial BankWatch:
"TBW-1" - This designation represents Thomson Financial 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 Financial 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 Financial 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 Financial BankWatch's
lowest rating category and indicates that the obligation is regarded as
non-investment grade and therefore speculative.
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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.
"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. There is
present 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.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.
"SG" - This designation denotes speculative quality. Debt instruments
in this category lack of margins of protection.
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Fitch IBCA and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
TAX-EXEMPT COMMERCIAL PAPER RATINGS
A Standard & Poor's ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. The following summarizes the rating
categories used by Standard and Poor's for commercial paper:
"A-1" - The highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
"A-2" - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
"A-3" - Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
"B" - Issues are regarded as having only a speculative capacity for
timely payment.
"C" - This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
"D" - Issues are in payment default. The "D" rating category is used
when interest payments of principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes such
payments will be made during such grace period.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the
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characteristics cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effects of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years. The following
summarizes the rating categories used by Fitch for short-term obligations:
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"F-1+" - Securities possess exceptionally strong credit quality.
Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less in degree
than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as the "F-1+" and "F-1" ratings.
"F-3" - Securities possess fair credit quality. Issues assigned this
rating have characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues assigned this
rating have characteristics suggesting a minimal degree of assurance for timely
payment and are vulnerable to near-term adverse changes in financial and
economic conditions.
"D" - Securities are in actual or imminent payment default.
"LOC" - The symbol "LOC" indicates that the rating is based on a
letter of credit issued by a commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely payment of principal and interest of debt instruments with original
maturities of one year or less. The following summarizes the ratings used by
Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis.
"TBW-2" - This designation represents Thomson BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.
"TBW-4" - This designation represents Thomson BankWatch's lowest
rating category and indicates that the obligation is regarded as non-investment
grade and therefore speculative.
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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.
"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. There is
present 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.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.
"SG" - This designation denotes speculative quality. Debt instruments
in this category 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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APPENDIX B
As stated in the Prospectus, the Small Cap Value, Equity Growth,
Equity Income, Small Cap Growth, International Equity, Equity Index, Tax Managed
Equity and Balanced Allocation Funds (the "Funds") may enter into certain
futures transactions and options for hedging purposes. Such transactions are
described in this Appendix.
INTEREST RATE FUTURES CONTRACTS
USE OF INTEREST RATE FUTURES CONTRACTS. Bond prices are established in
both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, the Fund may use interest rate futures
contracts as a defense, or hedge, against anticipated interest rate changes and
not for speculation. As described below, this would include the use of futures
contract sales to protect against expected increases in interest rates and
futures contract purchases to offset the impact of interest rate declines.
The Fund presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market, the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Fund, through using futures contracts.
DESCRIPTION OF INTEREST RATE FUTURES CONTRACTS. An interest rate
futures contract sale would create an obligation by the Fund, as seller, to
deliver the specific type of financial instrument called for in the contract at
a specific future time for a specified price. A futures contract purchase would
create an obligation by the Fund, as purchaser, to take delivery of the specific
type of financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until at or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.
Although interest rate futures contracts by their terms call for
actual delivery or acceptance of securities, in most cases the contracts are
closed out before the settlement date without the making or taking of delivery
of securities. Closing out a futures contract sale is effected by the Fund's
entering into a futures contract purchase for the same aggregate amount of the
specific type of financial instrument and the same delivery date. If the price
of the sale exceeds the price of the offsetting purchase, the Fund is
immediately paid the difference and thus realizes a gain. If the offsetting
purchase price exceeds the sale price, the Fund pays the difference and
<PAGE>
realizes a loss. Similarly, the closing out of a futures contract purchase is
effected by the Fund entering into a futures contract sale. If the offsetting
sale price exceeds the purchase price, the Fund realizes a gain, and if the
purchase price exceeds the offsetting sale price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction environment
on the floors of several exchanges -- principally, the Chicago Board of Trade,
the Chicago Mercantile Exchange and the New York Futures Exchange. The Fund
would deal only in standardized contracts on recognized exchanges. Each exchange
guarantees performance under contract provisions through a clearing corporation,
a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various
financial instruments including long-term United States Treasury Bonds and
Notes; Government National Mortgage Association (GNMA) modified pass-through
mortgage backed securities; three-month United States Treasury Bills; and
ninety-day commercial paper. The Fund may trade in any interest rate futures
contracts for which there exists a public market, including, without limitation,
the foregoing instruments.
EXAMPLE OF FUTURES CONTRACT SALE. The Fund may engage in an interest
rate futures contract sale to maintain the income advantage from continued
holding of a long-term bond while endeavoring to avoid part or all of the loss
in market value that would otherwise accompany a decline in long-term securities
prices. Assume that the market value of a certain security held by the Fund
tends to move in concert with the futures market prices of long-term United
States Treasury bonds ("Treasury bonds"). The adviser wants to fix the current
market value of this fund security until some point in the future. Assume the
fund security has a market value of 100, and the adviser believes that because
of an anticipated rise in interest rates, the value will decline to 95. The Fund
might enter into futures contract sales of Treasury bonds for a equivalent of
98. If the market value of the fund security does indeed decline from 100 to 95,
the equivalent futures market price for the Treasury bonds might also decline
from 98 to 93.
In that case, the five point loss in the market value of the fund
security would be offset by the five point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.
The adviser could be wrong in its forecast of interest rates and the
equivalent futures market price could rise above 98. In this case, the market
value of the fund securities, including the fund security being protected, would
increase. The benefit of this increase would be reduced by the loss realized on
closing out the futures contract sale.
If interest rate levels did not change, the Fund in the above example
might incur a loss (which might be reduced by a offsetting transaction prior to
the settlement date). In each transaction, transaction expenses would also be
incurred.
EXAMPLE OF FUTURES CONTRACT PURCHASE. The Fund may engage in an
interest rate futures contract purchase when it is not fully invested in
long-term bonds but wishes to defer for a
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time the purchase of long-term bonds in light of the availability of
advantageous interim investments, e.g., shorter term securities whose yields are
greater than those available on long-term bonds. The Fund's basic motivation
would be to maintain for a time the income advantage from investing in the
short-term securities; the Fund would be endeavoring at the same time to
eliminate the effect of all or part of a expected increase in market price of
the long-term bonds that the Fund may purchase.
For example, assume that the market price of a long-term bond that the
Fund may purchase, currently yielding 10%, tends to move in concert with futures
market prices of Treasury bonds. The adviser wishes to fix the current market
price (and thus 10% yield) of the long-term bond until the time (four months
away in this example) when it may purchase the bond. Assume the long-term bond
has a market price of 100, and the adviser believes that, because of an
anticipated fall in interest rates, the price will have risen to 105 (and the
yield will have dropped to about 9 1/2%) in four months. The Fund might enter
into futures contracts purchases of Treasury bonds for an equivalent price of
98. At the same time, the Fund would assign a pool of investments in short-term
securities that are either maturing in four months or earmarked for sale in four
months, for purchase of the long-term bond at an assumed market price of 100.
Assume these short-term securities are yielding 15%. If the market price of the
long-term bond does indeed rise from 100 to 105, the equivalent futures market
price for Treasury bonds might also rise from 98 to 103. In that case, the 5
point increase in the price that the Fund pays for the long-term bond would be
offset by the 5 point gain realized by closing out the futures contract
purchase.
The adviser could be wrong in its forecast of interest rates;
long-term interest rates might rise to above 10%; and the equivalent futures
market price could fall below 98. If short-term rates at the same time fall to
10% or below, it is possible that the Fund would continue with its purchase
program for long-term bonds. The market price of available long-term bonds would
have decreased. The benefit of this price decrease, and thus yield increase,
will be reduced by the loss realized on closing out the futures contract
purchase.
If, however, short-term rates remained above available long-term
rates, it is possible that the Fund would discontinue its purchase program for
long-term bonds. The yield on short-term securities in the Fund, including those
originally in the pool assigned to the particular long-term bond, would remain
higher than yields on long-term bonds. The benefit of this continued incremental
income will be reduced by the loss realized on closing out the futures contract
purchase. In each transaction, expenses would also be incurred.
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INDEX FUTURES CONTRACTS
GENERAL. A bond or stock index assigns relative values to the bonds or
stocks included in the index which fluctuates with changes in the market values
of the bonds or stocks included. Some stock index futures contracts are based on
broad market indexes, such as the Standard & Poor's Ratings Group 500 or the New
York Stock Exchange Composite Index. In contrast, certain exchanges offer
futures contracts on narrower market indexes or indexes based on an industry or
market segment, such as oil and gas stocks.
Futures contracts are traded on organized exchanges regulated by the
Commodity Futures Trading Commission. Transactions on such exchanges are cleared
through a clearing corporation, which guarantees the performance of the parties
to each contract.
The Fund may sell index futures contracts in order to offset a
decrease in market value of its fund securities that might otherwise result from
a market decline. The Fund may do so either to hedge the value of its fund as a
whole, or to protect against declines, occurring prior to sales of securities,
in the value of the securities to be sold. Conversely, the Fund may purchase
index futures contracts in anticipation of purchases of securities. A long
futures position may be terminated without a corresponding purchase of
securities.
In addition, the Fund may utilize index futures contracts in
anticipation of changes in the composition of its fund holdings. For example, in
the event that the Fund expects to narrow the range of industry groups
represented in its holdings it may, prior to making purchases of the actual
securities, establish a long futures position based on a more restricted index,
such as an index comprised of securities of a particular industry group. The
Fund may also sell futures contracts in connection with this strategy, in order
to protect against the possibility that the value of the securities to be sold
as part of the restructuring of the fund will decline prior to the time of sale.
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<PAGE>
MARGIN PAYMENTS
Unlike purchase or sales of fund securities, no price is paid or
received by the Fund upon the purchase or sale of a futures contract. Initially,
the Fund will be required to deposit with the broker or in a segregated account
with the Custodian or a subcustodian an amount of cash or cash equivalents,
known as initial margin, based on the value of the contract. The nature of
initial margin in futures transactions is different from that of margin in
security transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the Fund upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments, called variation margin, to and from the broker, will be made on a
daily basis as the price of the underlying instruments fluctuates making the
long and short positions in the futures contract more or less valuable, a
process known as marking-to-the-market. For example, when the Fund has purchased
a futures contract and the price of the contract has risen in response to a rise
in the underlying instruments, that position will have increased in value and
the Fund will be entitled to receive from the broker a variation margin payment
equal to that increase in value. Conversely, where the Fund has purchased a
futures contract and the price of the future contract has declined in response
to a decrease in the underlying instruments, the position would be less valuable
and the Fund would be required to make a variation margin payment to the broker.
At any time prior to expiration of the futures contract, the adviser may elect
to close the position by taking an opposite position, subject to the
availability of a secondary market, which will operate to terminate the Fund's
position in the futures contract. A final determination of variation margin is
then made, additional cash is required to be paid by or released to the Fund,
and the Fund realizes a loss or gain.
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<PAGE>
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS
There are several risks in connection with the use of futures by the
Fund as hedging devices. One risk arises because of the imperfect correlation
between movements in the price of the futures and movements in the price of the
instruments which are the subject of the hedge. The price of the future may move
more than or less than the price of the instruments being hedged. If the price
of the futures moves less than the price of the instruments which are the
subject of the hedge, the hedge will not be fully effective but, if the price of
the instruments being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the price of
the instruments being hedged has moved in a favorable direction, this advantage
will be partially offset by the loss on the futures. If the price of the futures
moves more than the price of the hedged instruments, the Fund will experience
either a loss or gain on the futures which will not be completely offset by
movements in the price of the instruments which are the subject of the hedge. To
compensate for the imperfect correlation of movements in the price of
instruments being hedged and movements in the price of futures contracts, the
Fund may buy or sell futures contracts in a greater dollar amount than the
dollar amount of instruments being hedged if the volatility over a particular
time period of the prices of such instruments has been greater than the
volatility over such time period of the futures, or if otherwise deemed to be
appropriate by the advisers. Conversely, the Fund may buy or sell fewer futures
contracts if the volatility over a particular time period of the prices of the
instruments being hedged is less than the volatility over such time period of
the futures contract being used, or if otherwise deemed to be appropriate by the
adviser.
Where futures are purchased to hedge against a possible increase in
the price of securities before the Fund is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if the Fund then concludes not to invest its cash at that time because
of concern as to possible further market decline or for other reasons, the Fund
will realize a loss on the futures contract that is not offset by a reduction in
the price of the instruments that were to be purchased.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
instruments being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest
B-6
<PAGE>
rate movements by the advisers may still not result in a successful hedging
transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a liquid
secondary market on any exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be possible to
close a futures investment position, and in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
variation margin. However, in the event futures contracts have been used to
hedge fund securities, such securities will not be sold until the futures
contract can be terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee that the price of
the securities will in fact correlate with the price movements in the futures
contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary market
in a futures contract may be adversely affected by "daily price fluctuation
limits" established by commodity exchanges which limit the amount of fluctuation
in a futures contract price during a single trading day. Once the daily limit
has been reached in the contract, no trades may be entered into at a price
beyond the limit, thus preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.
Successful use of futures by the Fund is also subject to the adviser's
ability to predict correctly movements in the direction of the market. For
example, if the Fund has hedged against the possibility of a decline in the
market adversely affecting securities held by it and securities prices increase
instead, the Fund will lose part or all of the benefit to the increased value of
its securities which it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Fund has insufficient
cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. The Fund may have to sell
securities at a time when it may be disadvantageous to do so.
B-7
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OPTIONS ON FUTURES CONTRACTS
The Fund may purchase and write options on the futures contracts
described above. A futures option gives the holder, in return for the premium
paid, the right to buy (call) from or sell (put) to the writer of the option a
futures contract at a specified price at any time during the period of the
option. Upon exercise, the writer of the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer, of
an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same series,
at which time the person entering into the closing transaction will realize a
gain or loss. The Fund will be required to deposit initial margin and variation
margin with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described above. Net option
premiums received will be included as initial margin deposits.
Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the purchase
or sale of an option also entails the risk that changes in the value of the
underlying futures contract will not correspond to changes in the value of the
option purchased. Depending on the pricing of the option compared to either the
futures contract upon which it is based, or upon the price of the securities
being hedged, an option may or may not be less risky than ownership of the
futures contract or such securities. In general, the market prices of options
can be expected to be more volatile than the market prices on the underlying
futures contract. Compared to the purchase or sale of futures contracts,
however, the purchase of call or put options on futures contracts may frequently
involve less potential risk to the Fund because the maximum amount at risk is
the premium paid for the options (plus transaction costs). The writing of an
option on a futures contract involves risks similar to those risks relating to
the sale of futures contracts.
OTHER MATTERS
Accounting for futures contracts will be in accordance with generally
accepted accounting principles.
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FORM N-1A
Part C - Other Information
Item 23. Exhibits
(a) 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").
1. 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").
2. 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").
3. Certificate of Classification of Shares reflecting the
creation of Class A, Class B, Class C, Class D, Class E
and Class F Shares of beneficial interest as filed with
the Office of the Secretary of State of Massachusetts
on September 30, 1985 is filed herewith.
4. 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").
5. 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 Funds as filed with the Office of Secretary
of State of Massachusetts on December 11, 1989 is
incorporated herein by reference to Exhibit 1(e) to PEA
No. 26.
6. 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 Funds as filed with the Office of the
Secretary of State of Massachusetts on September
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12, 1990 is incorporated herein by reference to Exhibit
1(e) to PEA No. 26.
7. 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 Fund, Equity Income Fund, Mid Cap Regional
Equity Fund, 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.
8. Certificate of Classification of Shares reflecting the
creation of Class Q and Class Q-Special Series 1, Class
R and Class R-Special Series 1, Class S and Class
S-Special Series 1, and Class T and Class T-Special
Series 1 shares representing interests in the
Pennsylvania Tax Exempt, Intermediate Government Fund,
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").
9. 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").
10. 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.
11. Certificate of Classification of Shares reflecting the
creation of Special Series 2 Shares representing
interests in the Money Market, Government Money Market,
Treasury Money Market,
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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, as filed with the Office of the
Secretary of State of Massachusetts on December 29,
1997 and with the City of Boston, Office of the City
Clerk on December 26, 1997, is incorporated herein by
reference to Exhibit 1(j) to Post-Effective Amendment
No. 44 to Registrant's Registration Statement filed on
September 18, 1998 ("PEA No 44").
12. Certificate of Classification of Shares reflecting the
creation of Class Z, Class Z - Special Series 1 and
Class Z - Special Series 2, Class AA, Class AA -
Special Series 1 and Class AA - Special Series 2 Shares
representing interests in the Tax Managed Equity and
Balanced Allocation Funds, respectively, as filed with
the Office of the Secretary of State of Massachusetts
and with the City of Boston, Office of the City Clerk
on July 13, 1998 is incorporated herein by reference to
Exhibit (1)(k) to PEA No. 44.
13. Certificate of Classification of Shares reflecting the
creation of Class BB and Class BB - Special Series 1
shares in the Ohio Municipal Money Market Fund, as
filed with the Office of the Secretary of State and
with the City of Boston, Office of the City Clerk on
September 15, 1998, is incorporated herein by reference
to Exhibit 1(k) to Post-Effective Amendment No. 43 to
Registrant's Registration Statement filed on September
15, 1998 ("PEA No. 43").
(b) 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").
1. Amendment No. 1 to Code of Regulations is incorporated
herein by reference to Exhibit 2(a) to PEA No. 6.
2. 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.
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(c) (1) 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.
2. 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").
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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").
10. 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.
11. 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.
C-4
<PAGE>
12. 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.
13. 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.
14. 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.
(d) (2) Advisory Agreement for the Money Market, Treasury Money
Market, Government Money Market, Tax Exempt Money
Market, Pennsylvania Tax Exempt Money Market, National
Tax Exempt, Intermediate Bond, GNMA, Bond, Equity
Growth, Equity Income, Small Cap Value, Ohio Tax Exempt
and Pennsylvania Municipal Funds between Registrant and
National City Bank, as dated November 19, 1997 is
incorporated by reference to Exhibit 5 (a) to PEA No.
44.
2. Interim Advisory Agreement for the Enhanced Income and
Total Return Advantage Funds between Registrant and
National Asset Management Corporation dated March 6,
1998 is incorporated by reference to Exhibit 5(b) to
PEA No. 44.
3. Interim Advisory Agreement for the Core Equity Fund
between Registrant and National Asset Management
Corporation dated March 6, 1998 is incorporated by
reference to Exhibit 5(c) to PEA No. 44.
4. New Advisory Agreement for the Core Equity, Enhanced
Income and Total Return Advantage Funds between
Registrant and National City Bank dated March 6, 1998
is incorporated by reference to Exhibit 5(d) to PEA No.
44.
5. Sub-Advisory Agreement for the Core Equity and Total
Return Advantage Funds between Registrant and National
Asset Management Corporation dated March 6, 1998 is
incorporated by reference to Exhibit 5(e) to PEA No.
44.
6. 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 dated April 9, 1998 is
incorporated herein by reference to Exhibit
C-5
<PAGE>
5(m) Post-Effective Amendment No. 42 filed on July l,
1998 ("PEA No. 42").
(e) Distribution Agreement between Registrant and SEI
Investments Distribution Co., dated May 1, 1998 is
incorporated by reference to Exhibit 6 to PEA No. 44.
(f) None.
(g) (3) 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").
2. 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.
3. 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.
4. 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.
(h) (4) Interim Administration Agreement between Registrant and
SEI Fund Resources, dated April 1, 1998 is incorporated
by reference to Exhibit 9(a) to PEA No. 44.
2. Administration Agreement between Registrant and SEI
Fund Resources, dated May 1, 1998 is incorporated by
reference to Exhibit 9(b) to PEA No. 44.
3. Sub-Administration Agreement between SEI Fund Resources
and National City Bank, dated May 1, 1998 is
incorporated by reference to Exhibit 9(c) to PEA No.
44.
4. 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.
C-6
<PAGE>
5. 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.
6. 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.
7. 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.
8. Assumption Agreement between National City Bank,
National City Investment Management Company, Armada
Funds, National Asset Management Corporation and SEI
Fund Resources, dated August 5, 1998.
(i) Opinion and consent of Drinker Biddle & Reath LLP as counsel
to Registrant is incorporated by reference to Exhibit 10(a)
to PEA No. 44.
(j) Consent of Drinker Biddle & Reath LLP.
(k) None
(l) (5) Purchase Agreements between Registrant and McDonald &
Company Securities, Inc. are incorporated herein by
reference to Exhibit 13 to PEA No. 1.
2. Purchase Agreement between Registrant and McDonald &
Company Securities, Inc. with respect to the Tax Exempt
Portfolio dated July 19, 1988 is incorporated by
reference to Exhibit 13(a) to Post-Effective Amendment
No. 5 to Registrant's Registration Statement filed on
January 19, 1989 ("PEA No. 5").
3. 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.
4. 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.
5. Purchase Agreement between Registrant and McDonald &
Company Securities, Inc. with respect to the Ohio Tax
Exempt
C-7
<PAGE>
Portfolio, dated January 5, 1990, is incorporated
herein by reference to Exhibit 13(d) to PEA No. 13.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
C-8
<PAGE>
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.
22. Form of Purchase Agreement between Registrant and SEI
Investments Distribution Co. with respect to the Ohio
Municipal Money Market Fund.
(m) (6) Service and Distribution Plan for A (formerly, Retail)
and I (formerly, Institutional) Share Classes is
incorporated herein by reference to Exhibit 15(a) to
PEA No. 38.
2. B shares Distribution and Servicing Plan is
incorporated herein by reference to Exhibit 15(b) to
PEA No. 38.
(n) None.
(o) 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.
C-9
<PAGE>
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Registrant is controlled by its Board of Trustees.
Item 25. 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
C-10
<PAGE>
favor of such person. The rights accruing to any person under
these provisions shall not exclude any other right to which he
may be lawfully entitled, PROVIDED that no person may satisfy any
right of indemnity or reimbursement hereunder except out of the
property of the Trust. The Trustees may make advance payments in
connection with the indemnification under this Section 9.3,
PROVIDED that the indemnified person shall have provided a
secured written undertaking to reimburse the Trust in the event
it is subsequently determined that he is not entitled to such
indemnification.
The Trustees shall indemnify representatives and employees of the
Trust to the same extent that Trustees are entitled to
indemnification pursuant to this Section 9.3.
Section 12 of Registrant's Custodian Services Agreement provides
as follows:
12. INDEMNIFICATION. The Trust, on behalf of each of the Funds,
agrees to indemnify and hold harmless the Custodian and its
nominees from all taxes, charges, expenses, assessments, claims
and liabilities (including, without limitation, liabilities
arising under the 1933 Act, the 1934 Act, the 1940 Act, the CEA,
and any state and foreign securities and blue sky laws, and
amendments thereto), and expenses, including (without limitation)
reasonable attorneys' fees and disbursements, arising directly or
indirectly from any 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.
C-11
<PAGE>
Section 6 of Registrant's Transfer Agency Agreement provides as
follows:
6. INDEMNIFICATION
6.1 The Bank shall not be responsible for, and the Fund shall on
behalf of the applicable Portfolio indemnify and hold the
Bank harmless from and against, any and all losses, damages,
costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors
required to be taken pursuant to this Agreement,
provided that such actions are taken in good faith and
without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any
representation or warranty of the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or
services which (i) are received by the Bank or its
agents or subcontractors, and (ii) have been prepared,
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
C-12
<PAGE>
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.
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
C-13
<PAGE>
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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
(a) Investment Adviser: National City Investment Management
Company ("IMC")
IMC performs investment advisory services for Registrant and
certain other investment advisory customers. IMC is an indirect wholly owned
subsidiary of National City Corporation (the "Corporation"). The Corporation
recently consolidated its mutual fund investment management operations under
IMC, a registered investment adviser. As of August 5, 1998, IMC assumed National
City Bank's rights, responsibilities, liabilities and obligations under its
Advisory Agreements with the Registrant relating to each of the Funds, its
Sub-Advisory Agreement with National Asset Management Corporation relating to
the Core Equity Fund, and its Sub-Administration Agreement with SEI Fund
Resources relating to each of the Funds. As of August 1, 1998, Wellington
Management Company LLP (the "sub-adviser") ceased serving as the sub-adviser to
the Small Cap Growth Fund under a sub-advisory agreement with National City Bank
and the Small Cap Growth Team of IMC began making the investment decisions for
the Fund.
To the knowledge of Registrant, none of the directors or officers
of IMC, 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, the Corporation,
which owns all the outstanding stock of National City Bank of Michigan/Illinois
(formerly, First of America Bank, N.A.), which in turn owns all the outstanding
stock of IMC, or other subsidiaries of the Corporation. Set forth below are the
names and principal businesses of the directors and certain of the senior
executive officers of IMC who are engaged in any other business, profession,
vocation or employment of a substantial nature.
C-14
<PAGE>
NATIONAL CITY INVESTMENT MANAGEMENT COMPANY
<TABLE>
<CAPTION>
Position with
National
City Investment
Management Other Business Type of
Name Company Connections Business
- ---- --------------- -------------- --------
<S> <C> <C> <C>
Kathleen T. Barr Managing Director, National City Bank Bank affiliate
Sales and Marketing
Susan E. Kentosch Vice President and National City Bank Bank affiliate
Chief Compliance
Officer
Robert M. Leggett Vice Chairman of the National City Bank Bank affiliate
Board, President and
Managing Director
Michael Minnaugh Chairman of the Board National City Bank Bank affiliate
and Managing Director
Joseph C. Penko Vice President and National City Bank Bank affiliate
Director, Legal Affairs
Donald L. Ross Chief Investment National City Bank Bank affiliate
Officer and Managing
Director
</TABLE>
(b) Sub-Investment Adviser: National Asset Management
Corporation ("NAM").
NAM performs sub-investment advisory services for the
Registrant's Total Return Advantage and Core Equity Funds. NAM is an investment
adviser registered under the Investment Advisers Act of 1940 (the "Advisers
Act").
To the knowledge of Registrant, none of the directors or officers
of NAM, 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. Set forth below
C-15
<PAGE>
are the names and principal business of the directors and certain of the senior
executive officers of NAM who are engaged in any other business, profession,
vocation, or employment of a substantial nature.
NATIONAL ASSET MANAGEMENT CORPORATION
<TABLE>
<CAPTION>
Position with
National Asset Other Business Type of
Name Management Connections Business
- ---- --------------- -------------- --------
<S> <C> <C> <C>
William F. Chandler Founder and Principal
Carl W. Hafele CEO and Principal None Investment Advisor
Michael C. Heyman Principal None Investment Advisor
David B. Hiller Principal None Investment Advisor
Stephen G. Mullins Principal None Investment Advisor
Larry J. Walker Principal None Investment Advisor
John W. Ferreby Principal None Investment Advisor
Catherine R. Stodghill Principal None Investment Advisor
Erik N. Evans Principal None Investment Advisor
Brent A. Bell Principal None Investment Advisor
Randall T. Zipfel COO and Principal None Investment Advisor
Matt Bevin Principal None Investment Advisor
Dave Chick Principal None Investment Advisor
</TABLE>
Item 27. 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.
C-16
<PAGE>
Registrant's distributor, SEI Investments Distribution Co. (the
"Distributor"), acts as distributor for:
SEI Daily Income Trust
SEI Liquid Asset Trust
SEI Tax Exempt Trust
SEI Index Funds
SEI Institutional Managed Trust
SEI Institutional International Trust
The Advisors' Inner Circle Fund
The Pillar Funds
CUFUND
STI Classic Funds
First American Funds, Inc.
First American Investment Funds, Inc.
The Arbor Fund
Boston 1784 Funds
The PBHG Funds, Inc.
Morgan Grenfell Investment Trust
The Achievement Funds Trust
Bishop Street Funds
CrestFunds, Inc.
STI Classic Variable Trust
ARK Funds
Huntington Funds
SEI Asset Allocation Trust
TIP Funds
SEI Institutional Investments Trust
First American Strategy Funds, Inc.
HighMark Funds
Armada Funds
PBHG Insurance Series Fund, Inc.
The Expedition Funds
Alpha Select Funds
Oak Associates Funds
The Nevis Fund, Inc.
The Parkstone Group of Funds
CNI Charter Funds
The Parkstone Advantage Fund
The Distributor provides numerous financial services to
investment managers, pension plan sponsors, and bank trust
departments. These services include portfolio evaluation,
performance measurement and consulting services ("Funds
Evaluation") and automated execution, clearing and settlement of
securities transactions ("MarketLink").
C-17
<PAGE>
(b) Furnish the information required by the following table
with respect to each director, officer or partner of each
principal underwriter named in the answer to Item 21 of Part B.
Unless otherwise noted, the principal business address of each
director or officer is Oaks, PA 19456.
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman of the Board --
of Directors
Henry H. Greer Director --
Carmen V. Romeo Director --
Mark J. Held President & Chief Operating --
Officer
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & --
Treasurer
Carl A. Guarino Senior Vice President --
Larry Hutchison Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President --
Kevin P. Robins Senior Vice President & General --
Counsel & Secretary
Patrick K. Walsh Senior Vice President --
Robert Aller Vice President --
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant --
Secretary
S. Courtney E. Collier Vice President & Assistant --
Secretary
Robert Crudup Vice President & Managing --
Director
Barbara Doyne Vice President --
Jeff Drennen Vice President --
Vic Galef Vice President & Managing --
Director
Lydia A. Gavalis Vice President & Assistant --
Secretary
Greg Gettinger Vice President & Assistant --
Secretary
Kathy Heilig Vice President & --
</TABLE>
C-18
<PAGE>
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Treasurer
Jeff Jacobs Vice President --
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 & Managing --
Director
Mark Nagle Vice President --
Joanne Nelson Vice President --
Cynthia M. Parrish Vice President & Assistant
Secretary
Kim Rainey Vice President --
Rob Redican Vice President --
Maria Rinehart Vice President --
Mark Samuels Vice President & Managing --
Director
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Assistant Treasurer
Secretary
Lynda J. Striegel Vice President & Assistant --
Secretary
Lori L. White Vice President & Assistant --
Secretary
Wayne M. Withrow Vice President & Managing --
Director
</TABLE>
Item 28. LOCATION OF ACCOUNTS AND RECORDS
(a) National City Investment Management Company, 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
adviser and custodian); and National Asset Management
Corporation, 101 South Fifth Street, Louisville, KY 40202.
(b) SEI Investments Distribution Co., One Freedom Valley Drive,
Oaks, Pennsylvania 19456 (records relating to its function
as distributor, accounting agent and administrator).
C-19
<PAGE>
(c) Drinker Biddle & Reath LLP, One Logan Square, 18th and
Cherry Streets, Philadelphia, Pennsylvania 19103-6996
(Registrant's Declaration of Trust, Code of Regulations, and
Minute Books).
(d) State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110 (records relating to its
function as transfer agent).
C-20
<PAGE>
Item 29. MANAGEMENT SERVICES
Inapplicable.
Item 30. 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-21
<PAGE>
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. 46 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 15th day of July, 1999.
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. 46 to Registrant's Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
*John H. Leven Treasurer July 15, 1999
- -------------------
John H. Leven
*Leigh Carter Trustee July 15, 1999
- -------------------
Leigh Carter
*John F. Durkott Trustee July 15, 1999
- -------------------
John F. Durkott
*Robert J. Farling Trustee July 15, 1999
- -------------------
Robert J. Farling
*Richard E. Furst Trustee July 15, 1999
- -------------------
Richard W. Furst
*Gerald Gherlein Trustee July 15, 1999
- -------------------
Gerald Gherlein
*Herbert Martens President and Trustee July 15, 1999
- -------------------
Herbert Martens
* Robert D. Neary Trustee and Chairman July 15, 1999
- ------------------- of the Board
Robert D. Neary
C-22
<PAGE>
* J. William Pullen Trustee July 15, 1999
- -------------------
J. William Pullen
*By: /s/ W. Bruce McConnel, III
---------------------------
W. Bruce McConnell, III
Attorney-in-Fact
C-23
<PAGE>
ARMADA FUNDS
Certificate of Secretary
The following resolution was duly adopted by the Board of Directors of
Armada Funds on May 11, 1999 and remains in effect on the date hereof.
FURTHER RESOLVED, that the officers of Armada and the Group
required to execute amendments to Armada's and the Group's Registration
Statements be, and hereby are, authorized to execute a Power of Attorney
appointing Herbert R. Martens, Jr. and W. Bruce McConnel, III, and either of
them, their true and lawful attorney or attorneys, to execute in their name,
place and stead, any and all amendments to the Registration Statements, and
all instruments necessary or incidental in connection therewith, and to file
the same with the Securities and Exchange Commission; and either of said
attorneys shall have full power of substitution and resubstitution; and to do
in the name and on behalf of said officers, 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 each or any of said officers might or
could do in person.
ARMADA FUNDS
By: /s/ W. Bruce McConnel, III
--------------------------
W. Bruce McConnel, III
Secretary
Dated: July 15, 1999
C-24
<PAGE>
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: November 19, 1997
/s/ Robert D. Neary
- -------------------
Robert D. Neary
C-25
<PAGE>
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: November 19, 1997
/s/ Leigh Carter
- ----------------
Leigh Carter
C-26
<PAGE>
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: November 19, 1997
/s/ John F. Durkott
- -------------------
John F. Durkott
C-27
<PAGE>
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: November 19, 1997
/s/Richard W. Furst
- -------------------
Richard W. Furst
C-28
<PAGE>
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
C-29
<PAGE>
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: November 19, 1997
/s/ J. William Pullen
- ---------------------
J. William Pullen
C-30
<PAGE>
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: November 19, 1997
/s/ Herbert R. Martens, Jr.
- ---------------------------
Herbert R. Martens, Jr.
C-31
<PAGE>
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: November 19, 1997
/s/ Gerald L. Gherlein
- ----------------------
Gerald L. Gherlein
C-32
<PAGE>
EXHIBIT INDEX
(h) (8) Assumption Agreement between National City Bank, National City
Investment Management Company, Armada Funds, National Asset
Management Corporation and SEI Fund Resources, dated August 5,
1998.
(j) Consent of Drinker Biddle & Reath LLP.
<PAGE>
Exhibit (h)(8)
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT (together with each amendment, if any, thereto,
this "AGREEMENT") is made as of this fifth day of August, 1998 (the "EFFECTIVE
DATE") by and among National City Bank ("BANK"), a national banking association;
National City Investment Management Company ("IMC"), a Michigan corporation
registered as an investment advisor under the Investment Advisers Act of 1940
(the "ADVISERS ACT"); Armada Funds (the "TRUST"), a Massachusetts business trust
registered as an investment company under the Investment Company Act of 1940;
National Asset Management Corporation ("NAM"), a Kentucky corporation registered
as an investment advisor under the Advisers Act; and SEI Fund Resources (the
"ADMINISTRATOR"), a Delaware business trust.
INTRODUCTION:
WHEREAS, I. Bank and the Trust are parties to the following advisory
agreements (each a "PRIMARY ADVISORY AGREEMENT" and all three such agreements
collectively, the "PRIMARY ADVISORY AGREEMENTS"), specifically
(A) an Advisory Agreement dated November 19, 1997,
pursuant to which, among other things, the Trust appointed Bank to act as
investment advisor to certain securities portfolios of the Trust, namely,
the Armada Money Market Fund, the Armada Treasury Money Market Fund, the
Armada Government Money Market Fund, the Armada Tax Exempt Money Market
Fund, the Armada Pennsylvania Tax Exempt Money Market Fund, the Armada
National Tax Exempt Fund, the Armada Intermediate Bond Fund, the Armada
GNMA Fund, the Armada Bond Fund, the Armada Equity Growth Fund, the Armada
Equity Income Fund, the Armada Ohio Tax Exempt Fund, and the Armada
Pennsylvania Municipal Fund,
(B) an Advisory Agreement dated March 6, 1998 pursuant
to which, among other things, the Trust appointed Bank to act as
investment advisor to certain securities portfolios of the Trust, namely,
the Armada Core Equity Fund, the Armada Enhanced Income Fund, and the
Armada Total Return Advantage Fund, and
(C) an Advisory Agreement dated April 9, 1998 pursuant
to which, among other things, the Trust appointed Bank to act as
investment advisor to certain securities portfolios of the Trust, namely,
the Armada International Equity Fund, the Armada Small Cap Value Fund, the
Armada Small Cap Growth Fund, the Armada Equity Index Fund, the Armada
Real Return Advantage Fund, the Armada Tax Managed Equity Fund, the Armada
Balanced Allocation Fund, and the Armada Ohio Municipal Money Market Fund;
II. Bank and NAM are parties to a Sub-Advisory
Agreement (the "SUB-ADVISORY AGREEMENT") dated March 6, 1998 pursuant to which,
among other things, Bank
-1 of 6-
<PAGE>
appointed NAM to act as investment sub-advisor to certain securities portfolios
of the Trust, namely, the Armada Core Equity Fund and the Armada Total Return
Advantage Fund;
III. Bank and the Administrator are parties to a
Sub-Administration Agreement (the "SUB-ADMINISTRATION AGREEMENT" and, together
with the Primary Advisory Agreements and the Sub-Advisory Agreement, the
"ASSIGNED AGREEMENTS") dated May 1, 1998 pursuant to which, among other things,
the Administrator retained Bank to assist the Administrator in providing
administrative services with respect to each securities portfolio of the Trust;
and
IV. each signatory to this Agreement desires to effect a
substitution of IMC in lieu of Bank under each of the Assigned Agreements to
which that signatory is a party, subject however, to the terms and conditions of
this Agreement;
THEREFORE, in consideration of the premises, in consideration of the
mutual agreements set forth in this Agreement and for other good and valuable
considerations, the adequacy and receipt of which are hereby acknowledged, Bank,
IMC, the Trust, NAM, and the Administrator hereby agree as follows:
1. NOVATION: PRIMARY ADVISORY AGREEMENTS. Bank hereby delegates to IMC, and IMC
hereby assumes from Bank, all duties, liabilities, and obligations of Bank
arising under, out of, or in connection with each of the Primary Advisory
Agreements, other than any such duties or obligations performed or to have been
performed prior to the Effective Date or any such liabilities arising out of or
in connection with any duties or obligations performed or to have been performed
prior to the Effective Date. Effective immediately after the assumption pursuant
to the next preceding sentence, the Trust hereby releases Bank from, and hereby
agrees to accept performance from IMC of, all duties, liabilities, and
obligations of Bank arising under, out of, or in connection with each of the
Primary Advisory Agreements, other than any such duties or obligations performed
or to have been performed prior to the Effective Date or any such liabilities
arising out of or in connection with any duties or obligations performed or to
have been performed prior to the Effective Date. Bank hereby assigns to IMC,
without recourse to Bank and without any representation or warranty, express or
implied, in fact or by law, except any representation or warranty expressly made
by Bank to IMC in this Agreement, all of Bank's rights (including, without
limitation, any rights to payment of money) under, out of, or in connection
with, each of the Primary Advisory Agreements, other than any such rights
(including, without limitation, any rights to payment of money) arising out of
or in connection with any duties or obligations performed or to have been
performed prior to the Effective Date or any such liabilities arising out of or
in connection with any duties or obligations performed or to have been performed
prior to the Effective Date.
2. NOVATION: SUB-ADVISORY AGREEMENT. Bank hereby delegates to IMC, and IMC
hereby assumes from Bank, all duties, liabilities, and obligations of Bank
arising under, out of, or in connection with the Sub-Advisory Agreement, other
than any such duties or obligations performed or to have been performed prior to
the Effective Date or any liabilities arising out of
-2 of 6-
<PAGE>
or in connection with any duties or obligations performed or to have been
performed prior to the Effective Date. Effective immediately after the
assumption pursuant to the next preceding sentence, NAM hereby releases Bank
from, and hereby agrees to accept performance from IMC of, all duties,
liabilities, and obligations of Bank arising under, out of, or in connection
with the Sub-Advisory Agreement, other than any such duties or obligations
performed or to have been performed prior to the Effective Date or any
liabilities arising out of or in connection with any duties or obligations
performed or to have been performed prior to the Effective Date. Bank hereby
assigns to IMC, without recourse to Bank and without any representation or
warranty, express or implied, in fact or by law, except any representation or
warranty expressly made by Bank to IMC in this Agreement, all of Bank's rights
(including, without limitation, any rights to payment of money) under, out of,
or in connection with, the Sub-Advisory Agreement, other than any such rights
(including, without limitation, any rights to payment of money) arising out of
or in connection with any duties or obligations performed or to have been
performed prior to the Effective Date or any such liabilities arising out of or
in connection with any duties or obligations performed or to have been performed
prior to the Effective Date.
3. NOVATION: SUB-ADMINISTRATION AGREEMENT. Bank hereby delegates to IMC, and IMC
hereby assumes from Bank, all duties, liabilities, and obligations of Bank
arising under, out of, or in connection with the Sub-Administration Agreement,
other than any such duties or obligations performed or to have been performed
prior to the Effective Date or any liabilities arising out of or in connection
with any duties or obligations performed or to have been performed prior to the
Effective Date. Effective immediately after the assumption pursuant to the next
preceding sentence, the Administrator hereby releases Bank from, and hereby
agrees to accept performance from IMC of, all duties, liabilities, and
obligations of Bank arising under, out of, or in connection with the
Sub-Administration Agreement, other than any such duties or obligations
performed or to have been performed prior to the Effective Date or any
liabilities arising out of or in connection with any duties or obligations
performed or to have been performed prior to the Effective Date. Bank hereby
assigns to IMC, without recourse to Bank and without any representation or
warranty, express or implied, in fact or by law, except any representation or
warranty expressly made by Bank to IMC in this Agreement, all of Bank's rights
(including, without limitation, any rights to payment of money) under, out of,
or in connection with, the Sub-Administration Agreement, other than any such
rights (including, without limitation, any rights to payment of money) arising
out of or in connection with any duties or obligations performed or to have been
performed prior to the Effective Date or any such liabilities arising out of or
in connection with any duties or obligations performed or to have been performed
prior to the Effective Date.
4. REPRESENTATIONS AND WARRANTIES. Bank hereby represents and warrants to IMC
that Bank is the legal and beneficial owner of the rights being assigned by Bank
pursuant to this Agreement and that such rights are free and clear of any
adverse claim. Each party that is, pursuant to section 7, an intended
beneficiary of any provision of this Agreement represents and warrants to each
other intended beneficiary of that provision that such provision is enforceable
in accordance its terms against the party so representing and warranting,
subject, however, to any applicable insolvency, receivership, or bankruptcy laws
and general principles of equity.
-3 of 6-
<PAGE>
5. PAYMENT OVER. If Bank or IMC shall receive any fee or other payment under the
Assigned Agreements or any thereof to which fee or other payment the other is,
by the terms of this Agreement, entitled in whole or in part, then, and in each
such case, the party receiving such fee or other payment shall, promptly
following the receipt thereof, pay over to such other such fee or other payment
or such part thereof to which such other is entitled.
6. WAIVERS, CONSENTS, AND AMENDMENTS. Each party to this Agreement may from time
to time in its discretion grant waivers and consents in respect of this
Agreement or assent to amendments thereof, but no such waiver, consent, or
amendment shall be binding upon that party unless set forth in a writing (which
writing shall be narrowly construed) signed by that party. If the consummation
of any transaction contemplated by this Agreement requires the agreement,
approval, or consent of any party to this Agreement, then, and in each such
case, that party's execution and delivery of this Agreement shall constitute
conclusive evidence that such party has agreed to, approved of, and consented to
the consummation of such transaction.
7. BINDING EFFECT. The provisions of this Agreement shall bind and benefit the
parities to this Agreement and their respective successors and assigns. No duty
arising by reason of this Agreement may be delegated without the prior written
consent of each party to whom that duty is owed, no right arising by reason of
this Agreement may be assigned without the prior written consent of each party
against whom that right may be enforced, and each actual or attempted delegation
or assignment in contravention of this section 7 shall be null and void AB
INITIO. Except for the parties to this Agreement and their respective successors
and permitted assigns, there are no intended beneficiaries of any of the
provisions of this Agreement. Other than Bank, IMC, the Trust, and their
respective successors and permitted assigns, there are no intended beneficiaries
of section 1 of this Agreement. Other than Bank, IMC, NAM, and their respective
successors and permitted assigns, there are no intended beneficiaries of section
2 of this Agreement. Other than Bank, IMC, Administrator, the Trust, and their
respective successors and permitted assigns, there are no intended beneficiaries
of section 3 of this Agreement. Other than Bank, IMC, and their respective
successors and permitted assigns, there are no intended beneficiaries of section
5 of this Agreement or of the first sentence of section 4 of this Agreement.
8. SURVIVAL. Each representation or warranty made in or pursuant to this
Agreement shall survive the execution and delivery of this Agreement.
9. CAPTIONS. The several captions to different sections of this Agreement are
inserted for convenience only and shall be ignored in interpreting the
provisions thereof.
10. SEVERABILITY. If any provision in this Agreement shall be or become illegal
or unenforceable in any case, then that provision shall be deemed modified in
that case so as to be legal and enforceable to the maximum extent permitted by
law while most nearly preserving its original intent, and in any case the
illegality or unenforceability of that provision shall affect neither that
provision in any other case nor any other provision.
-4 of 6-
<PAGE>
11. GOVERNING LAW. This Agreement shall be governed by the law (excluding
conflict of laws rules) of the State of Ohio.
12. NOTICES AND OTHER COMMUNICATIONS. Each notice, demand, or other
communication to a party pursuant to this Agreement shall be in writing and
shall be deemed received by that party upon the earliest to occur of
(a) the date of that party's actual receipt thereof, regardless of the
method of delivery,
(b) the date upon which a copy of that notice, demand, or other
communication, as the case may be, shall have been transmitted to the
telecopier number set forth opposite that party's signature below (or any
other telecopier number of which that party shall have given notice to the
other parties to this Agreement after the execution and delivery of this
Agreement), whether or not actually received by that party, or
(c) the fifth (5th) day following the date upon which that notice, demand,
or other communication, as the case may be, shall have been mailed by
certified or registered mail to that party at the address of that party
set forth opposite that party's signature below (or any other address of
which that party shall have given notice to the other parties to this
Agreement after the execution and delivery of this Agreement), whether or
not actually received by that party.
13. INTEGRATION. This Agreement and, to the extent consistent with this
Agreement, the Assigned Agreements, set forth the entire agreement of the
parties to this Agreement as to the subject matter of this Agreement, and the
provisions of this Agreement may not be contradicted by evidence of any
agreement or statement unless made in a writing (which writing shall be narrowly
construed) signed by the party alleged to have made such agreement or statement
contemporaneously with or after the execution and delivery of this Agreement.
14. EXECUTION AND DELIVERY. This Agreement may be executed and delivered in one
or more counterparts, each of which shall be deemed an original, but all of
which shall, taken together, constitute but one agreement. Any party named in
this Agreement may deliver an executed signature page to this Agreement by
telecopier transmission to any other party, and the party so delivering that
signature page shall be deemed to have executed and delivered that signature
page with the intent to be bound by this Agreement.
-5 of 6-
<PAGE>
<TABLE>
<S> <C>
Address: National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114 By: ________________________________
Attention: Kathleen T. Barr
Locator No. 2220 Name: ______________________________
Telecopier No. (216) 771-8490
Title: _____________________________
Address: National City Investment Management Company
1900 East Ninth Street
Cleveland, Ohio 44114 By: ________________________________
Attention: Robert M. Leggett
Locator No. 2220 Name: ______________________________
Telecopier No. (216) 575-3123
Title: _____________________________
Address: Armada Funds
1965 East Sixth Street, Suite 800
Cleveland, Ohio 44114 By: ________________________________
Attention: Herbert R. Martens, Jr.
Telecopier No. (216) 575-2513 Name: ______________________________
Title: _____________________________
Address: National Asset Management Corporation
101 South Fifth Street
Louisville, Kentucky 40202 By: ________________________________
Attention: Stephen G. Mullins
Telecopier No. (502) 581-5105 Name: ______________________________
Title: _____________________________
Address: SEI Fund Resources
One Freedom Drive
Oaks, Pennsylvania 19456 By: ________________________________
Attention: Lynda Striegel
Telecopier No. (610) 676-1040 Name: ______________________________
Title: _____________________________
</TABLE>
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<PAGE>
Exhibit (j)
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. 45 to the Registration
Statement on Form N-1A under the Investment Company Act of 1940, as amended, of
Armada Funds. This consent does not constitute a consent under Section 7 of the
Securities Act of 1933, and in consenting to the use of our name and the
references to our Firm under such caption we have not certified any part of the
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under Section 7 or the rules and regulations
of the Securities and Exchange Commission thereunder.
/s/ DRINKER BIDDLE & REATH LLP
-------------------------------
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
July 15, 1999
