<PAGE>
As filed with the Securities and Exchange Commission on October 6, 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. 48
/x/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
/x/
Amendment No. 47
/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):
[X] 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)
[ ] 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
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 159
<PAGE>
INVESTMENT ADVISER
NATIONAL CITY INVESTMENT MANAGEMENT COMPANY
INVESTMENT SUB-ADVISER
NATIONAL ASSET MANAGEMENT CORPORATION
(ARMADA CORE EQUITY FUND AND ARMADA TOTAL RETURN ADVANTAGE FUND)
Page 2 of 159
<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.
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:
<TABLE>
<CAPTION>
<S> <C>
PAGE
ARMADA INTERNATIONAL EQUITY FUND................................................... 6
ARMADA SMALL CAP VALUE FUND........................................................ 10
ARMADA SMALL CAP GROWTH FUND....................................................... 14
ARMADA EQUITY GROWTH FUND.......................................................... 18
ARMADA TAX MANAGED EQUITY FUND..................................................... 22
ARMADA CORE EQUITY FUND............................................................ 26
ARMADA EQUITY INDEX FUND........................................................... 30
ARMADA EQUITY INCOME FUND.......................................................... 32
ARMADA BALANCED ALLOCATION FUND.................................................... 37
ARMADA TOTAL RETURN ADVANTAGE FUND................................................. 41
ARMADA BOND FUND................................................................... 45
ARMADA INTERMEDIATE BOND FUND...................................................... 49
ARMADA GNMA FUND................................................................... 53
ARMADA ENHANCED INCOME FUND........................................................ 57
ARMADA OHIO TAX EXEMPT BOND FUND................................................... 61
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND............................................ 65
ARMADA NATIONAL TAX EXEMPT BOND FUND............................................... 69
ARMADA OHIO MUNICIPAL MONEY MARKET FUND............................................ 74
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND................................... 77
ARMADA TAX EXEMPT MONEY MARKET FUND................................................ 80
ARMADA MONEY MARKET FUND........................................................... 84
ARMADA GOVERNMENT MONEY MARKET FUND................................................ 88
ARMADA TREASURY MONEY MARKET FUND.................................................. 91
ARMADA MID CAP GROWTH FUND......................................................... 94
ARMADA LARGE CAP ULTRA FUND........................................................ 97
ARMADA U.S. GOVERNMENT INCOME FUND.................................................100
ARMADA MICHIGAN MUNICIPAL BOND FUND................................................103
ARMADA TREASURY PLUS MONEY MARKET FUND.............................................106
MORE INFORMATION ABOUT RISK........................................................108
EACH FUND'S OTHER INVESTMENTS......................................................118
THE INVESTMENT ADVISER, SUB-ADVISER AND
INVESTMENT TEAM....................................................................118
Page 3 of 159
<PAGE>
PURCHASING, SELLING AND EXCHANGING FUND SHARES.....................................XXX
DIVIDENDS, DISTRIBUTIONS AND TAXES.................................................XXX
FINANCIAL HIGHLIGHTS...............................................................XXX
</TABLE>
Page 4 of 159
<PAGE>
RISK/RETURN SUMMARY
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.
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.
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
primarily 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.
Fund performance is measured against 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.
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
Page 5 of 159
<PAGE>
ARMADA INTERNATIONAL EQUITY FUND
FUND SUMMARY
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Equity securities of foreign issuers
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 of foreign
issuers. Equity securities of foreign issuers include common, preferred and
convertible bonds, of companies headquartered outside the United States. 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, Australasia, Far East (World EAFE) Index. The
Adviser makes judgements about the attractiveness of countries based upon a
collection of criteria. The relative valuation, growth prospects, fiscal,
monetary and regulatory government policies are considered jointly and generally
in making these judgements. The percentage of the Fund in each country is
determined by its relative attractiveness and weight in the World EAFE Index.
More than 25% of the Fund's assets may be invested in the securities of issuers
located in the same country. Within foreign markets, the Adviser buys and sells
securities based on its analysis of competitive position and valuation. The
Adviser sells securities whose competitive position is deteriorating or whose
valuation is unattractive relative to industry peers. Likewise, companies with
strong and durable competitive advantages and attractive valuation are
considered for purchase.
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, and will lower Fund performance.
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
Page 6 of 159
<PAGE>
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.
Companies making up the EAFE Index are generally issuers of larger cap
securities of multi-national companies who are affected by risks worldwide.
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 different countries.
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. For additional information about risks, see "More Information
About Risk."
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.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below would.
<TABLE>
<CAPTION>
<S> <C>
1998 19.53%
BEST QUARTER WORST QUARTER
20.04% -15.62%
(12/31/98) (9/30/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 4.71%.
Page 7 of 159
<PAGE>
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 12.95% 3.45%(1)
MORGAN STANLEY EAFE INDEX(2) 20.00% 12.35%(3)
</TABLE>
(1) Since August 1, 1997.
(2) The Morgan Stanley Capital International Europe, Australasia and Far East
(EAFE) Index represents the performance of the major stock markets in those
regions.
(3) Since August 31, 1997.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 5.50% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 1.15% 1.15%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.48% 0.52%
----- -----
Total Annual Fund Operating Expenses 1.73%3 2.42%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
(2) This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge
is charged after the fifth year. For more information see "Selling Fund
Shares."
(3) The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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:
<TABLE>
<CAPTION>
<S> <C>
Armada International Equity Fund-- Class A Shares 1.67%
</TABLE>
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 8 of 159
<PAGE>
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 $716 $1,065 $1,437 $2,479
CLASS B SHARES $745 $1,155 $1,491 $2,583
</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 B SHARES $245 $755 $1,291 $2,583
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 9 of 159
<PAGE>
ARMADA SMALL CAP VALUE FUND
FUND SUMMARY
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Small cap equity securities
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 small capitalization companies. The Fund may invest up to 20%
of its total assets at the time of purchase in foreign equity securities. In
buying and selling securities for the Fund, the Adviser uses a value-oriented
approach. The Adviser generally 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 generally sells securities based upon
price/earnings, price/book and price/cash flow ratios which rise above market
averages or when a company no longer has a small capitalization.
The Fund considers a small capitalization or "small cap" company to be one that
has a comparable market capitalization to the companies in the Russell 2000
Value Index.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may increase transaction costs and capital gains tax liabilities, and will
lower Fund performance.
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.
Smaller capitalization companies may be more vulnerable to adverse business or
economic events than larger, more established companies. In particular, these
companies may have limited product lines, markets and financial resources, and
may depend upon a relatively small
Page 10 of 159
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
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.
<TABLE>
<CAPTION>
<S> <C>
1995 18.41%
1996 22.32%
1997 32.05%
1998 -7.64%
BEST QUARTER WORST QUARTER
17.65% -17.92%
(12/31/98) (9/30/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 6.49%.
Page 11 of 159
<PAGE>
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 -12.74% 13.53%(1)
RUSSELL 2000 VALUE INDEX(2) -2.55% 13.71%(3)
</TABLE>
(1) Since August 15, 1994.
(2) Since Russell 2000 Value Index is comprised of securities in The Russell
2000 Index with a less than average growth orientation. Companies in this index
generally have low price to book and price-earnings ratios.
(3) Since August 31, 1994.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 5.50% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
<S> <C> <C>
CLASS A SHARES CLASS B SHARES
- ------------------------------------------------------------------------------------------------------------
Investment Advisory Fees 1.00% 1.00%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.40% 0.40%
----- -----
Total Annual Fund Operating Expenses 1.50%(3) 2.15%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
(2) This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge
is charged after the fifth year. For more information see "Selling Fund
Shares."
(3) The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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:
<TABLE>
<CAPTION>
<S> <C>
Armada Small Cap Value Fund-- Class A Shares 1.44%
</TABLE>
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 12 of 159
<PAGE>
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 $694 $998 $1,323 $2,242
CLASS B SHARES $718 $1,073 $1,354 $2,315
</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 B SHARES $218 $673 $1,154 $2,315
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 13 of 159
<PAGE>
ARMADA SMALL CAP GROWTH FUND
FUND SUMMARY
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Small cap equity securities
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
PRINCIPAL INVESTMENT STRATEGY Investing in growth-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
PRINCIPAL INVESTMENT STRATEGIES 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. The Adviser seeks to invest in small capitalization companies with
strong growth in revenue, earnings, and cash flow. Purchase decision are also
based on the security's valuation relative to the company's expected growth
rate, earnings quality and competitive position, valuation compared to similar
securities, and the security's trading liquidity. Reasons for selling securities
include disappointing fundamentals, negative industry developments, evidence of
management's inability to execute a sound business plan, capitalization
exceeding the Adviser's definition of "small capitalization", desire to reduce
exposure to an industry or sector, and valuation levels which cannot be
justified by the company's fundamental growth prospects.
The Fund considers a small capitalization or "small cap" company to be one that
has a comparable market capitalization to 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, and will lower Fund performance.
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
Page 14 of 159
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
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.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<CAPTION>
<S> <C>
1998 7.28%
BEST QUARTER WORST QUARTER
22.67% -21.18%
(12/31/98) (9/30/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -2.38%.
Page 15 of 159
<PAGE>
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 1.39% 6.03%(1)
RUSSELL 2000 GROWTH INDEX(2) -2.55% 0.81%(3)
</TABLE>
(1) Since August 1, 1997.
(2) The Russell 2000 Growth Index is comprised of securities in the Russell
2000 Stock Index with a greater than average growth orientation.
(3) Since August 31, 1997.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 5.50% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 1.00% 1.00%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.42% 0.42%
----- -----
Total Annual Fund Operating Expenses 1.52%(3) 2.17%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
(2) This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge
is charged after the fifth year. For more information see "Selling Fund
Shares."
(3) The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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:
<TABLE>
<CAPTION>
<S> <C>
Armada Small Cap Growth Fund-- Class A Shares 1.46%
</TABLE>
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 16 of 159
<PAGE>
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 $696 $1,004 $1,333 $2,263
CLASS B SHARES $720 $1,079 $1,364 $2,336
</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 B SHARES $220 $679 $1,164 $2,336
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 17 of 159
<PAGE>
ARMADA EQUITY GROWTH FUND
FUND SUMMARY
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Large cap equity securities
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 to the companies in the S&P 500 Composite
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, and will lower Fund performance.
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
Page 18 of 159
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
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.
<TABLE>
<CAPTION>
<S> <C>
1992 6.05%
1993 -0.47%
1994 -0.94%
1995 28.51%
1996 19.98%
1997 36.34%
1998 28.74%
BEST QUARTER WORST QUARTER
22.85% -9.00%
(12/31/98) (9/30/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 8.77%.
Page 19 of 159
<PAGE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE S&P 500 COMPOSITE INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ARMADA EQUITY GROWTH FUND 21.66% 20.43% 15.61%(1)
S&P 500 COMPOSITE INDEX(2) 28.60% 24.05% 19.64%(3)
</TABLE>
(1) Since April 15, 1991.
(2) The S&P 500 Composite Index is a widely recognized, unmanaged index of
common stocks generally representative of the U.S. stock market as a whole.
(3) Since April 30, 1991.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
<S> <C> <C>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 5.50% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)2 None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
<S> <C> <C>
CLASS A SHARES CLASS B SHARES
- ------------------------------------------------------------------------------------------------------------
Investment Advisory Fees 0.75% 0.75%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.38% 0.38%
----- -----
Total Annual Fund Operating Expenses 1.23%(3) 1.88%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
(2) This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge
is charged after the fifth year. For more information see "Selling Fund
Shares."
(3) The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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:
<TABLE>
<CAPTION>
<S> <C>
Armada Equity Growth Fund-- Class A Shares 1.17%
</TABLE>
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 20 of 159
<PAGE>
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 $668 $919 $1,188 $1,957
CLASS B SHARES $691 $991 $1,216 $2,030
</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 B SHARES $191 $591 $1,016 $2,030
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 21 of 159
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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. Equity securities of foreign issuers include common, preferred and
convertible bonds, of companies headquartered outside the United States. 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. 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. The Fund may redeem in-kind redemptions consistent with its investment
objective. An in-kind redemption may serve to minimize any tax impact on the
remaining shareholders, because a Fund generally recognizes no taxable gain (or
loss) on the securities used to make an in-kind redemption. 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
Page 22 of 159
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
PERFORMANCE INFORMATION
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.
<TABLE>
<CAPTION>
<S> <C> <C>
1989 29.63%
1990 -1.08%
1991 34.07%
1992 6.89%
1993 1.20%
1994 -1.85%
1995 29.51%
1996 20.64%
1997 39.06%
1998 37.25%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C> <C>
23.02% -14.38%
(12/31/98) (9/30/90)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 7.44%.
Page 23 of 159
<PAGE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE S&P 500 COMPOSITE INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS 10 YEARS SINCE
INCEPTION
- ------------------------------------------------------------------------------------------------------ ---------------
<S> <C> <C> <C> <C>
ARMADA TAX MANAGED EQUITY FUND 29.74% 22.57% 17.80% 17.65%(1)
S&P 500 COMPOSITE INDEX (2) 28.60% 24.05% 19.19% 18.97%(1)
</TABLE>
(1) Since June 30, 1984.
(2) The S&P 500 Composite Index is widely recognized, unmanaged index of common
stocks generally representative of the U.S. stock market as a whole.
The performance of the Armada Tax Managed Equity Fund for the period prior to
May 11, 1998 is represented by the performance of a common trust fund ("common
trust fund") which operated prior to the effectiveness of the registration
statement of the Tax Managed Equity Fund. At the time of the Tax Managed Equity
Fund's inception, the common trust fund was operated using materially equivalent
investment objectives, policies, guidelines and restrictions as the Fund. In
connection with the Tax Managed Equity Fund's commencement of operations, on May
11, 1998, the common trust fund transferred its assets to the Fund. At the time
of the transfer, the Adviser did not manage any other collective investment or
common trust funds using materially equivalent investment objectives, policies,
guidelines and restrictions to those of the Tax Managed Equity Fund.
The common trust fund was not open to the public generally, nor registered under
the Investment Company Act of 1940 (the "1940 Act") or subject to certain
restrictions that are imposed by the 1940 Act and the Internal Revenue Code. If
the common trust fund had been registered under the 1940 Act, performance may
have been adversely affected. Performance quotations of the common trust fund
represent past performance of the Adviser managed common trust fund, which are
separate and distinct from the Tax Managed Equity Fund; do not represent past
performance of the Fund; and should not be considered as representative of
future results of the Fund.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 5.50% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
Page 24 of 159
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.75% 0.75%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.40% 0.40%
----- -----
Total Annual Fund Operating Expenses 1.25%(3) 1.90%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second
years. The deferred sales charge decreases to 4.0%, 3.0% and 2.0% for
redemptions made during the third through fifth years, respectively. No deferred
sales charge is charged after the fifth year. For more information see "Selling
Fund Shares."
(3)The Fund's total actual annual operating expenses for the most
recent fiscal year were less than the amount shown above because the Distributor
is waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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 1.19%
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 $670 $925 $1,199 $1,978
CLASS B SHARES $693 $997 $1,226 $2,051
</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 B SHARES $193 $597 $1,026 $2,051
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 25 of 159
<PAGE>
ARMADA CORE EQUITY FUND
FUND SUMMARY
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Large cap common stocks
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 stock market
capitalizations. The Sub-Adviser will normally invest between 20% and 50% of its
assets in the following three types of equity securities: (1) common stocks that
meet the Sub-Adviser's criteria for five-year annual earnings-per-share growth
rates and which exhibit no decline in the normalized annual earnings-per-share
rate during the last five years; (2) common stocks with price-to-earnings ratios
below the average of the companies included in the S&P 500 Composite Index; and
(3) common stocks that pay dividends at a rate above the average of the
companies included in the S&P 500 Composite Index.
The Sub-Adviser utilizes a systematic, disciplined investment process when
selecting individual securities. This includes: (1) screening a database for
liquidity and the criteria listed above; (2) scoring each issue emphasizing
fundamental, valuation and technical indicators; and (3) security analysis that
further evaluates the company and the stock, which includes an analysis of
company fundamentals such as earnings, profitability and management, valuation
such as price/earnings, price/book and yield, and technical analysis emphasizing
individual stock price trends.
The sell discipline involves the monitoring of each company's fundamental,
valuation, and technical measures. If one of these measures is unfavorable, an
immediate review of that company is performed. If two of these three measures
are unfavorable, that stock is sold. The Fund may invest up to 20% of its total
assets at the time of purchase in foreign securities.
The Fund considers a large capitalization or "large cap" company to be one that
has a comparable market capitalization to the companies in the S&P 500 Composite
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, and will lower Fund performance.
Page 26 of 159
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
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.
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below would.
<TABLE>
1998 31.99%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
25.04% -6.90%
(12/31/98) (9/30/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 12.87%.
Page 27 of 159
<PAGE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE S&P 500 COMPOSITE INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------------------
<S> <C> <C>
ARMADA CORE EQUITY FUND 24.68% 19.13%(1)
S&P 500 COMPOSITE INDEX(2) 28.60% 28.38%(3)
</TABLE>
(1) Since August 1, 1997.
(2) The S&P 500 Composite Index is a widely recognized, unmanaged index of
common stocks generally representative of the U.S. stock market as a whole.
(3)Since August 31, 1997.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 5.50% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.75% 0.75%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.37% 0.37%
----- -----
Total Annual Fund Operating Expenses 1.22%(3) 1.87%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares.
(2) This amount applies to redemptions during the first and second years.
The deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions
made during the third through fifth years, respectively. No deferred sales
charge is charged after the fifth year. For more information see "Selling
Fund Shares.
(3) The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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 1.16%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 28 of 159
<PAGE>
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 $667 $916 $1,183 $1,946
CLASS B SHARES $690 $988 $1,211 $2,019
</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 B SHARES $190 $588 $1,011 $2,019
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 29 of 159
<PAGE>
ARMADA EQUITY INDEX FUND
FUND SUMMARY
INVESTMENT GOAL To approximate, before Fund expenses,
the investment results of the S&P 500
Composite Index
INVESTMENT FOCUS Common stocks of larger issuers
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
PRINCIPAL INVESTMENT STRATEGY Investing in stocks that comprise the
S&P 500 Composite Index
INVESTOR PROFILE Investors seeking returns similar to
the S&P 500 Composite Index, who are
willing to accept the risk of
investing in equity securities
PRINCIPAL INVESTMENT STRATEGIES 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 Composite Index by
investing in securities comprising the S&P 500 Composite Index. The investment
objective may be changed without a shareholder vote. The S&P 500 Composite Index
is made up of common stocks of 500 large, publicly traded companies. The Fund
buys and holds all stocks included in the S&P 500 Composite Index in exactly the
same proportion as those stocks are held in the Index. Stocks are eliminated
from the Fund when removed from the S&P 500 Composite Index. 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, and will lower Fund performance.
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
Composite Index of common stocks, may underperform other equity market segments
or the equity market as a whole.
The Fund's ability to duplicate the performance of the S&P 500 Composite 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
Page 30 of 159
<PAGE>
of the Fund's expenses. For additional information about risks, see "More
Information About Risk."
PERFORMANCE INFORMATION
There is no performance information for the Class A because it has not completed
a full calendar year of operations.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES
- -----------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 3.75%
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a percentage of offering price) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES
- -----------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.35%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.41%
--------
Total Annual Fund Operating Expenses 0.86%(2)
- -----------------------------------------------------------------------------------
</TABLE>
(1) This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares.
(2) The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.61%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 31 of 159
<PAGE>
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:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $459 $639 $834 $1,396
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 32 of 159
<PAGE>
ARMADA EQUITY INCOME FUND
FUND SUMMARY
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Income producing equity
securities
SHARE PRICE VOLATILITY Medium
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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. Equity
securities include public and privately issued equity securities, common and
preferred stocks, warrants, rights to subscribe to common stock and convertible
securities, as well as instruments that attempt to track the price movement of
equity indices. 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 dividends with a yield above the S&P 500 Composite
Index. The Fund may invest up to 20% of its total assets at the time of purchase
in foreign equity 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, and will lower Fund performance.
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.
Page 33 of 159
<PAGE>
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. For additional information about risks, see "More Information
About Risk."
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.
<TABLE>
<CAPTION>
<S> <C>
1995 27.37%
1996 17.89%
1997 28.87%
1998 9.77%
BEST QUARTER WORST QUARTER
12.50% -8.97%
(6/30/97) (9/30/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 10.73%.
Page 34 of 159
<PAGE>
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE S&P 500 BARRA/VALUE INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- ---------------------------------------------------------------------------
<S> <C> <C>
ARMADA EQUITY INCOME FUND 3.72% 16.79%(1)
S&P 500 BARRA/VALUE INDEX(2) 14.68% 22.21%(3)
</TABLE>
(1) Since August 22, 1994.
(2) The S&P 500 Barra/Value Index is comprised of securities in the S&P 500
Composite Index that have a lower than average price-to-book ratio.
(3) Since August 31, 1994.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 5.50% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.75% 0.75%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.39% 0.39%
----- -----
Total Annual Fund Operating Expenses 1.24%(3) 1.89%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
(2) This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge
is charged after the fifth year. For more information see "Selling Fund
Shares."
(3) The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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 1.18%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 35 of 159
<PAGE>
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>
CLASS A SHARES $669 $922 $1,194 $1,967
CLASS B SHARES $692 $994 $1,221 $2,040
</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>
CLASS B SHARES $192 $594 $1,021 $2,040
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 36 of 159
<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, fixed income
securities and cash equivalents
SHARE PRICE VOLATILITY Medium
(RELATIVE TO MUTUAL FUNDS GENERALLY)
PRINCIPAL INVESTMENT STRATEGY Investing in a diversified portfolio
of growth-oriented common stocks,
investment grade fixed income
securities and cash equivalents with
varying asset allocations depending
on the Adviser's assessment of
market conditions
INVESTOR PROFILE Investors seeking a broad
diversification by asset class and
style to manage risk and provide the
potential for above-average total
returns (as gauged by the returns
of the S&P 500 Composite Index and
the Lehman Brothers Aggregate Bond
Index)
PRINCIPAL INVESTMENT STRATEGIES 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 Fund may invest up to 20% of its total
assets at the time of purchase in foreign securities (which include common
preferred and convertible bonds of companies headquartered outside the United
States). The Fund also invests in small capitalization companies. 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) for current income. The Fund invests in
cash equivalent, short-term obligations for stability and liquidity.
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, and will lower Fund performance.
Page 37 of 159
<PAGE>
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
Page 38 of 159
<PAGE>
segments or the fixed income or equity markets as a whole. For additional
information about risks, see "More Information About Risk."
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 BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 4.75% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.75% 0.75%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.46% 0.46%
----- -----
Total Annual Fund Operating Expenses 1.31%(3) 1.96%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
(2) This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge
is charged after the fifth year. For more information see "Selling Fund
Shares."
(3) The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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 1.25%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 39 of 159
<PAGE>
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 $602 $870 $1,159 $1,979
CLASS B SHARES $699 $1,015 $1,257 $2,115
</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 B SHARES $199 $615 $1,057 $2,115
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 40 of 159
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 U.S. government issuers. Fixed
income securities are designed to provide a fixed rate of interest at maturity
and return the principal value at the end of the term. 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. If a security is downgraded, the Adviser will re-evaluate whether
continuing to hold the security is in the best interest of shareholders. 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,
sometimes known as "junk bonds."
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, and will lower Fund performance.
Page 41 of 159
<PAGE>
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.
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.
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the Portfolio (such as an asset-backed
security) later than expected. This may happen during a period of rising
interest rates. Under these circumstances, the value of the obligation will
decrease and the Portfolio will suffer from the inability to invest in higher
yielding 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 full faith and credit of the United States,
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. Examples of agencies and
instrumentalities of the U.S. government include GNMA and TV Authority.
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. For additional information about risks, see
"More Information About Risk."
Page 42 of 159
<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.
<TABLE>
<CAPTION>
<S> <C>
1995 18.37%
1996 2.86%
1997 8.54%
1998 8.68%
BEST QUARTER WORST QUARTER
6.28% -2.58%
(6/30/95) (3/31/96)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -2.72%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ARMADA TOTAL RETURN ADVANTAGE FUND 3.51% 7.33%(1)
LEHMAN GOVERNMENT/CORPORATE BOND INDEX(2) 9.47% 9.66%(3)
</TABLE>
(1) Since September 6, 1994.
(2) The Lehman Government/Corporate Bond Index is a widely recognized index of
government and corporate debt securities rated investment grade or better, with
maturities of at least 1 year.
(3) Since September 30, 1994.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 4.75% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
Page 43 of 159
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.55% 0.55%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.34% 0.39%
-------------- --------------
Total Annual Fund Operating Expenses 1.09%(3) 1.69%(3)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
(2) This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge
is charged after the fifth year. For more information see "Selling Fund
Shares."
(3) The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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:
<TABLE>
<CAPTION>
<S> <C>
Armada Total Return Advantage Fund--Class A Shares 0.74%
Armada Total Return Advantage Fund--Class B Shares 1.49%
</TABLE>
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 $576 $790 $1,022 $1,686
CLASS B SHARES $672 $933 $1,118 $1,823
</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 B SHARES $172 $533 $918 $1,823
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 44 of 159
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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. If a security is
downgraded, the Adviser will re-evaluate the holding to determine whether it is
in the best interests of investors to sell. 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 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, and will lower Fund performance.
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.
Page 45 of 159
<PAGE>
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.
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the Portfolio (such as an asset-backed
security) later than expected. This may happen during a period of rising
interest rates. Under these circumstances, the value of the obligation will
decrease and the Portfolio will suffer from the inability to invest in higher
yielding 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. For additional information about risks, see
"More Information About Risk."
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.
<TABLE>
<S> <C>
1997 7.71%
1998 8.19%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
4.59% -0.12%
(9/30/98) (12/31/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -2.09%.
Page 46 of 159
<PAGE>
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 3.05% 6.12%(1)
LEHMAN AGGREGATE BOND INDEX(2) 8.67% 9.55%(3)
</TABLE>
(1)Since September 11, 1996.
(2)The Lehman Aggregate Bond Index is an unmanaged, fixed income, market
value-weighted index that includes treasury issues, agency issues, corporate
bond issues and mortgage-backed securities.
(3)Since September 30, 1996.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 4.75% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.55% 0.55%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.39% 0.39%
----- -----
Total Annual Fund Operating Expenses 1.04%(3) 1.69%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge is
charged after the fifth year. For more information see "Selling Fund Shares."
(3)The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor 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 0.98%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 47 of 159
<PAGE>
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 $576 $790 $1,022 $1,686
CLASS B SHARES $672 $933 $1,118 $1,823
</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 B SHARES $172 $533 $918 $1,823
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 48 of 159
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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. 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 maturity of between three 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.
Page 49 of 159
<PAGE>
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the Portfolio (such as an asset-backed
security) later than expected. This may happen during a period of rising
interest rates. Under these circumstances, the value of the obligation will
decrease and the Portfolio will suffer from the inability to invest in higher
yielding 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. For additional information about risks, see
"More Information About Risk."
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.
<TABLE>
<S> <C>
1992 6.91%
1993 10.81%
1994 -4.78%
1995 15.39%
1996 2.77%
1997 6.67%
1998 7.44%
</TABLE>
Page 50 of 159
<PAGE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
5.33% -3.34%
(6/30/95) (3/31/94)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -1.26%.
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 2.32% 4.27% 6.45%(1)
LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX(2) 8.42% 6.59% 7.77%(3)
</TABLE>
(1)Since April 15, 1991.
(2)The Lehman Intermediate Government/Corporate Bond Index is representative of
intermediate-term bonds.
(3)Since April 30, 1991.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)(1) 4.75% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.55% 0.55%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.40% 0.40%
---- -----
Total Annual Fund Operating Expenses 1.05%(3) 1.70%(3)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge is
charged after the fifth year. For more information see "Selling Fund Shares."
(3)The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor 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 0.84%
Armada Intermediate Bond Fund - Class B Shares 1.55%
Page 51 of 159
<PAGE>
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 $577 $793 $1,027 $1,697
CLASS B SHARES $673 $936 $1,123 $1,834
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS B SHARES $173 $536 $923 $1,834
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 52 of 159
<PAGE>
ARMADA GNMA FUND
FUND SUMMARY
INVESTMENT GOAL Current income as well as
preservation of capital
INVESTMENT FOCUS Mortgage-backed
securities
SHARE PRICE VOLATILITY Low
(RELATIVE TO MUTUAL FUNDS GENERALLY)
PRINCIPAL INVESTMENT STRATEGY Investing in
mortgage-backed
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
PRINCIPAL INVESTMENT STRATEGIES 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-backed 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-backed 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 such as Treasuries,
agencies, asset-backed securities and commercial paper.
In buying and selling securities for the Fund, the Adviser assesses current and
projected market conditions by considering a number of factors including yield
to maturity, maturity, quality and the outlook for particular issuers and market
sectors.
The Fund's dollar-weighted average portfolio maturity will be between three 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, and will lower Fund performance.
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.
Page 53 of 159
<PAGE>
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.
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the Portfolio (such as an asset-backed
security) later than expected. This may happen during a period of rising
interest rates. Under these circumstances, the value of the obligation will
decrease and the Portfolio will suffer from the inability to invest in higher
yielding securities.
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. For additional information about risks, see "More
Information About Risk."
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.
<TABLE>
<S> <C>
1997 9.03%
1998 6.34%
</TABLE>
Page 54 of 159
<PAGE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
4.05% -0.07%
(6/30/97) (3/31/97)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -0.36%.
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 1.33% 6.22%(1)
LEHMAN GNMA INDEX(2) 6.91% 8.66%(3)
</TABLE>
(1)Since September 11, 1996.
(2)The Lehman GNMA Index trades GNMA issues, including single family, mobile
home, midgets and graduated payments components.
(3)Since September 30, 1996.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 4.75% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.55% 0.55%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.43% 0.43%
----- -----
Total Annual Fund Operating Expenses 1.08%(3) 1.73%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge is
charged after the fifth year. For more information see "Selling Fund Shares."
(3)The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor 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 1.02%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 55 of 159
<PAGE>
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 $580 $802 $1,042 $1,730
CLASS B SHARES $676 $945 $1,139 $1,867
</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 B SHARES $176 $545 $939 $1,867
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 56 of 159
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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,
including obligations of corporate and government issuers, 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. 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, and will lower Fund performance.
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.
Page 57 of 159
<PAGE>
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.
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the Portfolio (such as an asset-backed
security) later than expected. This may happen during a period of rising
interest rates. Under these circumstances, the value of the obligation will
decrease and the Portfolio will suffer from the inability to invest in higher
yielding 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. For additional information about risks, see
"More Information About Risk."
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.
<TABLE>
<S> <C>
1995 7.60%
1996 5.18%
1997 6.33%
1998 6.58%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
3.12% 0.53%
(9/30/98) (3/31/97)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 1.13%.
Page 58 of 159
<PAGE>
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 3.70% 5.53%(1)
MERRILL LYNCH 1-3 YEAR
GOVERNMENT/CORPORATE INDEX(2) 7.01% 6.98%(3)
</TABLE>
(1)Since September 9, 1994.
(2)This is a market capitalization weighted index including U.S. Treasury and
Agency bonds and U.S. fixed coupon investment grade corporate bonds (U.S.
domestic and Yankee/global bonds). U.S. Treasury bonds must have at least $1
billion face value outstanding and agency and corporate bonds must have at
least $150 million face value outstanding to be included in the index. Both
total return and price returns are calculated daily. Prices are taken as of
approximately 3 p.m. ET. Quality range is BBB3-AAA based on composite Moody
and S&P ratings. Maturities for all bonds are greater than or equal to one
year and less than three years. Floaters, Equipment Trust Certificates, and
Title 11 securities are excluded.
(3)Since September 30, 1994.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 2.75% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.45% 0.45%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.28% 0.28%
----- -----
Total Annual Fund Operating Expenses 0.83%(3) 1.48%(3)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge is
charged after the fifth year. For more information see "Selling Fund Shares."
(3)The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor 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:
<TABLE>
<S> <C>
Armada Enhanced Income Fund -- Class A Shares 0.63%
Armada Enhanced Income Fund -- Class B Shares 1.38%
</TABLE>
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 59 of 159
<PAGE>
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:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $357 $533 $723 $1,272
CLASS B SHARES $651 $868 $1,008 $1,591
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD YOUR EXPENSES WOULD BE:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
CLASS B SHARES $151 $468 $808 $1,591
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 60 of 159
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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. The Fund
normally invests at least 80% 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). However, some Fund dividends
will be taxable, such as dividends that are derived from occasional taxable
investments and distributions of short and long-term capital gains. Also, Fund
dividends will generally be subject to state and local income taxes for any
shareholders who are not Ohio residents. 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 primarily 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. If a security is
downgraded, the Adviser will re-evaluate whether continuing to hold the
security is in the best interest of shareholders. The Fund ordinarily will
maintain an average weighted portfolio maturity of between three 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,
and will lower Fund performance.
Page 61 of 159
<PAGE>
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.
The Fund's focus 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 than a
diversified fund 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. For additional
information about risks, see "More Information About Risk."
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.
Page 62 of 159
<PAGE>
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<C> <C>
1992 6.82%
1993 10.14%
1994 -4.19%
1995 13.37%
1996 3.92%
1997 7.35%
1998 5.25%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C> <C>
5.04% -4.89%
(3/31/95) (3/31/94)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -1.28%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN 7 YEAR MUNICIPAL BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ARMADA OHIO TAX EXEMPT BOND FUND 2.13% 4.35% 5.76%(1)
LEHMAN 7 YEAR MUNICIPAL BOND INDEX(2) 6.23% 5.80% 7.19%(3)
</TABLE>
(1)Since April 15, 1991.
(2)The Lehman 7 Year Municipal Bond Index is a broad based total return
index. The bonds are all investment grade, fixed rate with maturities of 7-8
years and are selected from issues larger than $50 million dated since
January 1984.
(3)Since April 30, 1991.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 3.00% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
Page 63 of 159
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.55% 0.55%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.25% 0.25%
----- -----
Total Annual Fund Operating Expenses(3) 0.90% 1.55%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge is
charged after the fifth year. For more information see "Selling Fund Shares."
(3)The Fund's total actual annual operating expenses for the most recent fiscal
year (restated to reflect advisory waivers to take effect on October 1, 1999)
were less than the amount shown above because the Adviser and Distributor are
each waiving a portion of the fees in order to keep total operating expenses at
a specified level. The Adviser and Distributor 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:
<TABLE>
<S> <C>
Armada Ohio Tax Exempt Bond Fund -- Class A Shares 0.69%
Armada Ohio Tax Exempt Bond Fund -- Class B Shares 1.40%
</TABLE>
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 $389 $578 $784 $1,375
CLASS B SHARES $658 $890 $1,045 $1,669
</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 B SHARES $158 $490 $845 $1,669
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 64 of 159
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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
normally invests at least 80% of its net assets 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). However,
some Fund dividends will be taxable, such as dividends that are derived from
occasional taxable investments and distributions of short and long-term capital
gains. Also, Fund dividends will generally be subject to state and local income
taxes for any shareholders who are not Pennsylvania residents. 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 primarily 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. If a security is
downgraded, the Adviser will re-evaluate whether continuing to hold the security
is in the best interest of shareholders. The Fund ordinarily will maintain an
average weighted portfolio maturity of between three 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,
and will lower Fund performance.
Page 65 of 159
<PAGE>
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 focus 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. For additional information about risks, see
"More Information About Risk."
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.
Page 66 of 159
<PAGE>
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<S> <C>
1997 6.83%
1998 5.62%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<C> <C>
2.88% -0.14%
(9/30/98) (3/31/97)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -1.23%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998, TO THOSE OF THE LEHMAN 7 YEAR MUNICIPAL BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR SINCE INCEPTION
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND 2.49% 5.26%(1)
LEHMAN 7 YEAR MUNICIPAL BOND INDEX(2) 6.23% 7.31%(3)
</TABLE>
(1)Since September 11, 1996
(2)The Lehman 7 Year Municipal Bond Index is a broad based total return index.
The bonds are all investment grade, fixed rate with maturities of 7-8 years and
are selected from issues larger than $50 million dated since January 1984.
(3)Since September 30, 1996.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 3.00% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
Page 67 of 159
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.55% 0.55%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.29% 0.29%
----- -----
Total Annual Fund Operating Expenses(3) 0.94% 1.59%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge is
charged after the fifth year. For more information see "Selling Fund Shares."
(3)The Fund's total actual annual operating expenses for the most recent fiscal
year (restated to reflect advisory fee waivers to take effect on October 1,
1999) were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor 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:
<TABLE>
<S> <C>
Armada Pennsylvania Municipal Bond Fund- Class A Shares 0.69%
Armada Pennsylvania Municipal Bond Fund- Class B Shares 1.44%
</TABLE>
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 $393 $591 $804 $1,420
CLASS B SHARES $662 $902 $1,066 $1,713
</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 B SHARES $162 $502 $866 $1,713
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 68 of 159
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 normally invests at least 80% of its net assets in debt securities that
generate income exempt from federal income tax. However, Fund dividends will
generally be taxable for state and local income tax purposes. Also, some Fund
dividends will be taxable for federal income tax purposes, such as those derived
from occasional taxable investments and distributions of short and long-term
capital gains. 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 primarily 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 three 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,
and will lower Fund performance.
Page 69 of 159
<PAGE>
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. For additional information about risks, see "More
Information About Risk."
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.
Page 70 of 159
<PAGE>
The chart does not reflect sales charges. If sales charges had been reflected,
returns would be less than those shown below.
<TABLE>
<S> <C>
1989 9.79%
1990 4.65%
1991 8.45%
1992 9.74%
1993 11.76%
1994 -4.58%
1995 14.05%
1996 -1.07%
1997 6.57%
1998 5.85%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
5.44% -4.13%
(3/31/95) (3/31/94)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -1.19%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN 10 YEAR MUNI BOND INDEX.
<TABLE>
<CAPTION>
CLASS A SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARMADA NATIONAL TAX EXEMPT FUND 0.83% 2.95% 5.86% 6.88%(1)
LEHMAN 10 YEAR MUNI BOND INDEX(2) 6.76% 6.35% 8.32% X.XX%(3)
</TABLE>
(1)Since July 31, 1984
(2)The Lehman 10 Year Muni Bond Index is a road based total return index. The
bonds are all investment grade, fixed rate with maturities of 9-12 years and are
selected from issues larger than $50 million dated since January 1984.
(3)Since July 31, 1984
The performance of the National Tax Exempt Bond Fund for the period prior to
June 22, 1998 is represented by the performance of a common trust fund ("common
trust fund") which operated prior to the effectiveness of the registration
statement of the National Tax Exempt Bond Fund. At the time of the National Tax
Exempt Bond Fund's inception, the common trust fund was operated using
materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. In connection with the National Tax Exempt Bond Fund's
commencement of operations, on June 22, 1998, the common trust fund transferred
its assets to the Fund. At the time of the transfer, the Adviser did not manage
any other collective investment or common trust funds using materially
equivalent investment objectives, policies, guidelines and restrictions to those
of the National Tax Exempt Bond Fund.
The common trust fund was not open to the public generally, nor registered under
the Investment Company Act of 1940 (the "1940 Act") or subject to certain
restrictions that are imposed by the 1940 Act and the Internal Revenue Code. If
the common trust fund had been registered under the 1940 Act, performance may
have been adversely affected. Performance quotations of the common trust fund
represent past performance of the Adviser managed common trust fund, which are
separate and distinct from the National Tax Exempt Bond Fund; do not represent
past
Page 71 of 159
<PAGE>
performance of the Fund; and should not be considered as representative of
future results of the Fund.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) 4.75% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.55% 0.55%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.25% 0.25%
----- -----
Total Annual Fund Operating Expenses(3) 0.90% 1.55%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second
years. The deferred sales charge decreases to 4.0%, 3.0% and 2.0% for
redemptions made during the third through fifth years, respectively. No deferred
sales charge is charged after the fifth year. For more information see "Selling
Fund Shares."
(3)The Fund's total actual annual operating expenses for the most
recent fiscal year (restated to reflect advisory fee waivers to take effect on
October 1, 1999) were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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:
<TABLE>
<S> <C>
Armada National Tax Exempt Bond Fund-- Class A Shares 0.69%
Armada National Tax Exempt Bond Fund-- Class B Shares 1.40%
</TABLE>
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 72 of 159
<PAGE>
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 $562 $748 $950 $1,530
CLASS B SHARES $658 $890 $1,045 $1,669
</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 B SHARES $158 $490 $845 $1,669
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 73 of 159
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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). However, some Fund
dividends may be taxable if the Fund, as it is permitted to do, invests some of
its assets in taxable instruments. Also, Fund dividends will generally be
subject to state and local income taxes for any shareholders who are not Ohio
residents. 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.
Page 74 of 159
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
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 MAXIMUM FEES
AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
Page 75 of 159
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES
- ------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.35%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.32%
-----
Total Annual Fund Operating Expenses 0.77%(1)
- ------------------------------------------------------------------------
</TABLE>
(1)The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor 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 0.51%
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> <C>
CLASS A SHARES $79 $246 $428 $954
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 76 of 159
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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). However, some Fund dividends may be taxable if the Fund, as
it is permitted to do, invests some of its assets in taxable instruments. Also,
Fund dividends will generally be subject to state and local income taxes for any
shareholders who are not Pennsylvania residents. 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 preference 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.
Page 77 of 159
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
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.
<TABLE>
<S> <C>
1997 3.33%
1998 2.98%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
0.87% 0.68%
(6/30/97) (9/30/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 1.32%.
Page 78 of 159
<PAGE>
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 PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND 2.98% 3.17%(1)
</TABLE>
(1)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 MAXIMUM 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 0.40%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.31%
-----
Total Annual Fund Operating Expenses 0.81%(1)
- -------------------------------------------------------------------------------------------
</TABLE>
(1)The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor 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 0.50%
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> <C>
CLASS A SHARES $83 $259 $450 $1,002
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 79 of 159
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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).
However, Fund dividends will generally be taxable for state and local income tax
purposes. Also, some Fund dividends may be taxable for federal income tax
purposes if the Fund, as it is permitted to do, invests some of its assets in
taxable 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.
Page 80 of 159
<PAGE>
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. For additional information about risks, see
"More Information About Risk."
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.
<TABLE>
<S> <C>
1992 2.41%
1993 1.90%
1994 2.41%
1995 3.46%
1996 3.11%
1997 3.27%
1998 3.08%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
0.91% 0.43%
(6/30/95) (3/31/93)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 1.30%.
Page 81 of 159
<PAGE>
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 3.08% 3.06% 2.91%*
</TABLE>
Since April 1, 1991
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) None None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.35% 0.35%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.27% 0.27%
----- -----
Total Annual Fund Operating Expenses 0.72%(3) 1.37%(3)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second
years. The deferred sales charge decreases to 4.0%, 3.0% and 2.0% for
redemptions made during the third through fifth years, respectively. No deferred
sales charge is charged after the fifth year. For more information see "Selling
Fund Shares."
(3)The Fund's total actual annual operating expenses for the most
recent fiscal year were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.46%
Armada Tax Exempt Money Market Fund -- Class B Shares 1.17%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 82 of 159
<PAGE>
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 $74 $230 $401 $894
CLASS B SHARES $639 $834 $950 $1,467
</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 B SHARES $139 $434 $750 $1,467
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 83 of 159
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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. Foreign government obligations are U.S.
dollar-denominated obligations (limited to commercial paper and other notes)
issued or guaranteed by a foreign government or other entity located or
organized in a foreign country that maintains a short-term foreign currency
rating in the highest short-term ratings category by the requisite number of
Nationally Recognized Statistical Rating Organizations (NRSROs). 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 actively buys throughout the
money market, laddering maturities to meet or exceed shareholder liquidity needs
while seeking the highest possible yield consistent with the Fund's risk
profile.
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.
Page 84 of 159
<PAGE>
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. For additional information about risks, see "More
Information About Risk."
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.
<TABLE>
<S> <C>
1992 3.22%
1993 2.64%
1994 3.88%
1995 5.61%
1996 5.09%
1997 5.22%
1998 5.11%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
1.40% 0.64%
(6/30/95) (6/30/93)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 2.21%.
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 MONEY MARKET FUND 5.11% 4.98% 4.48%(1)
</TABLE>
(1)Since April 1, 1991
Page 85 of 159
<PAGE>
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price)(1) None None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fees 0.35% 0.35%
Distribution and Service (12b-1) Fees 0.10% 0.75%
Other Expenses 0.25% 0.25%
---- ----
Total Annual Fund Operating Expenses 0.70%(3) 1.35%(3)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second
years. The deferred sales charge decreases to 4.0%, 3.0% and 2.0% for
redemptions made during the third through fifth years, respectively. No deferred
sales charge is charged after the fifth year. For more information see "Selling
Fund Shares."
(3)The Fund's total actual annual operating expenses for the most
recent fiscal year were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.54%
Armada Money Market Fund -- Class B Shares 1.25%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 86 of 159
<PAGE>
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 $72 $224 $390 $871
CLASS B SHARES $637 $828 $939 $1,444
</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 B SHARES $137 $428 $739 $1,444
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 87 of 159
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 actively buys throughout the money market,
laddering maturities to meet or exceed shareholder liquidity needs while seeking
the highest possible yield consistent with the Fund's risk profile.
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
Page 88 of 159
<PAGE>
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. For
additional information about risks, see "More Information About Risk."
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.
<TABLE>
<S> <C>
1992 3.25%
1993 2.63%
1994 3.81%
1995 5.53%
1996 5.04%
1997 5.14%
1998 4.98%
</TABLE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C> <C>
1.39% 0.64%
(6/30/95) (3/31/93)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 2.17%.
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 GOVERNMENT MONEY MARKET FUND 4.98% 4.90% 4.40%(1)
</TABLE>
(1)Since April 1, 1991
Page 89 of 159
<PAGE>
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 MAXIMUM 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 0.35%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.25%
-----
Total Annual Fund Operating Expenses 0.70%(1)
- -------------------------------------------------------------------------------------------
</TABLE>
(1)The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor 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 0.54%
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> <C>
CLASS A SHARES $72 $224 $390 $871
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 90 of 159
<PAGE>
ARMADA TREASURY MONEY MARKET FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High current income consistent
with stability of principal
while maintaining liquidity
INVESTMENT FOCUS U.S. Treasury securities
SHARE PRICE VOLATILITY Very low
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
</TABLE>
PRINCIPAL INVESTMENT STRATEGIES 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 actively buys throughout the money market,
laddering maturities to meet or exceed shareholder liquidity needs while seeking
the highest possible yield consistent with the Fund's risk profile.
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. For additional information about risks, see "More
Information About Risk."
Page 91 of 159
<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.
<TABLE>
<S> <C>
1995 5.27%
1996 4.75%
1997 4.81%
1998 4.54%
BEST QUARTER WORST QUARTER
1.34% 1.00%
(6/30/95) (12/31/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 1.99%.
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 4.54% 4.84%(1)
</TABLE>
(1)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 MAXIMUM 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 0.30%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.28%
-----
Total Annual Fund Operating Expenses 0.68%(1)
- --------------------------------------------------------------------- ----------------------
</TABLE>
(1)The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Adviser and Distributor
are each waiving a portion of the fees in order to keep total operating expenses
at a specified level. The Adviser and Distributor 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:
Page 92 of 159
<PAGE>
<TABLE>
<S> <C>
Armada Treasury Money Market Fund -- Class A Shares 0.57%
</TABLE>
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> <C>
CLASS A SHARES $69 $218 $379 $847
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 93 of 159
<PAGE>
ARMADA MID CAP GROWTH FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Mid-cap equity securities
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
</TABLE>
PRINCIPAL INVESTMENT STRATEGIES 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, and will lower Fund performance.
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
Page 94 of 159
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
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 BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ------------------------------------------------------------------------------------ ---------------- ----------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)(1) 5.50% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------- --------------------------- --------------------------
<S> <C> <C>
Investment Advisory Fees 1.00% 1.00%
Distribution and Service (12b-1) Fees(3) 0.10% 0.75%
Other Expenses(4) 0.47% 0.47%
----- -----
Total Annual Fund Operating Expenses 1.57% 2.22%
- --------------------------------------------------- --------------------------- --------------------------
</TABLE>
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second
years. The deferred sales charge decreases to 4.0%, 3.0% and 2.0% for
redemptions made during the third through fifth years, respectively. No deferred
sales charge is charged after the fifth year. For more information see "Selling
Fund Shares."
(3)The Administrator plans to waive a portion of its fees for the
current fiscal year. The Administrator may revise or cancel this expense
limitation at any time and will notify you of any material change.
(4)"Other Expenses" are based on estimated amounts for the current fiscal year.
Page 95 of 159
<PAGE>
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 $701 $1,018
CLASS B SHARES $725 $1,094
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
CLASS B SHARES $225 $694
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 96 of 159
<PAGE>
ARMADA LARGE CAP ULTRA FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Large cap equity securities
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
</TABLE>
PRINCIPAL INVESTMENT STRATEGIES 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. For additional information about risks, see "More Information About
Risk."
Page 97 of 159
<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 BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ------------------------------------------------------------------------------------ ---------------- ----------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)(1) 5.50% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------- ---------------------- -------------------------
<S> <C> <C>
Investment Advisory Fees 0.75% 0.75%
Distribution and Service (12b-1) Fees(3) 0.10% 0.75%
Other Expenses(4) 0.43% 0.43%
----- -----
Total Annual Fund Operating Expenses 1.28% 1.93%
- --------------------------------------------------------------------- ---------------------- -------------------------
</TABLE>
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second
years. The deferred sales charge decreases to 4.0%, 3.0% and 2.0% for
redemptions made during the third through fifth years, respectively. No deferred
sales charge is charged after the fifth year. For more information see "Selling
Fund Shares."
(3)The Administrator plans to waive a portion of its fees for the
current fiscal year. The Administrator may revise or cancel this expense
limitation at any time and will notify you of any material change.
(4)"Other Expenses" are based on estimated amounts for the current fiscal year.
Page 98 of 159
<PAGE>
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 $673 $934
CLASS B SHARES $696 $1,006
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
CLASS B SHARES $196 $606
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 99 of 159
<PAGE>
ARMADA U.S. GOVERNMENT INCOME FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL Current income as well as preservation of capital
INVESTMENT FOCUS U.S. government securities
SHARE PRICE VOLATILITY Low
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
</TABLE>
PRINCIPAL INVESTMENT STRATEGIES 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 mortgage-related debt securities and preferred stock of
non-governmental issues and the same proportion of its total assets in
non-governmental asset backed securities. 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 a dollar-weighted average maturity of
between three 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, and will lower Fund performance.
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.
Page 100 of 159
<PAGE>
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.
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the Portfolio (such as an asset-backed
security) later than expected. This may happen during a period of rising
interest rates. Under these circumstances, the value of the obligation will
decrease and the Portfolio will suffer from the inability to invest in higher
yielding 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. For additional information about risks, see "More
Information About Risk."
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 BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ------------------------------------------------------------------------------------ ---------------- ----------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)(1) 4.75% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
Page 101 of 159
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------- ---------------------- -------------------------
<S> <C> <C>
Investment Advisory Fees 0.55% 0.55%
Distribution and Service (12b-1) Fees(3) 0.10% 0.75%
Other Expenses(4) 0.43% 0.43%
----- -----
Total Annual Fund Operating Expenses 1.08% 1.73%
- --------------------------------------------------------------------- ---------------------- -------------------------
</TABLE>
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second
years. The deferred sales charge decreases to 4.0%, 3.0% and 2.0% for
redemptions made during the third through fifth years, respectively. No deferred
sales charge is charged after the fifth year. For more information see "Selling
Fund Shares."
(3)The Administrator plans to waive a portion of its fees for the
current fiscal year. The Administrator may revise or cancel this expense
limitation at any time and will notify you of any material change.
(4)"Other Expenses" are based on estimated amounts for the current fiscal year.
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 $580 $802
CLASS B SHARES $676 $945
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
CLASS B SHARES $176 $545
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 102 of 159
<PAGE>
ARMADA MICHIGAN MUNICIPAL BOND FUND
FUND SUMMARY
<TABLE>
<S> <C>
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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
</TABLE>
PRINCIPAL INVESTMENT STRATEGIES 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. The Fund will normally invest at least 80% of the value of its total
assets in Michigan municipal securities. However, some Fund dividends will be
taxable, such as dividends that are derived from occasional taxable investments
and distributions of short and long-term capital gains. Also, Fund dividends
will generally be subject to state and local income taxes for any shareholders
who are not Michigan residents. 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 three 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.
Page 103 of 159
<PAGE>
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, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING IN THE ARMADA MICHIGAN 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 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. For additional information about risks, see
"More Information About Risk."
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.
Page 104 of 159
<PAGE>
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES CLASS B SHARES
- ------------------------------------------------------------------------------------ ---------------- ----------------
<S> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price)(1) 4.75% None
Maximum Deferred Sales Charge (Load) (as a percentage of net asset value)(2) None 5.00%
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
- --------------------------------------------------------------------- ---------------------- -------------------------
<S> <C> <C>
Investment Advisory Fees 0.74% 0.74%
Distribution and Service (12b-1) Fees(3) 0.10% 0.75%
Other Expenses(4) 0.43% 0.43%
----- -----
Total Annual Fund Operating Expenses 1.27% 1.92%
- --------------------------------------------------------------------- ---------------------- -------------------------
</TABLE>
(1)This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2)This amount applies to redemptions during the first and second
years. The deferred sales charge decreases to 4.0%, 3.0% and 2.0% for
redemptions made during the third through fifth years, respectively. No deferred
sales charge is charged after the fifth year. For more information see "Selling
Fund Shares."
(3)The Administrator plans to waive a portion of its fees for the
current fiscal year. The Administrator may revise or cancel this expense
limitation at any time and will notify you of any material change.
(4)"Other Expenses" are based on estimated amounts for the current fiscal year.
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 $598 $859
CLASS B SHARES $695 $1,002
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
<S> <C> <C>
CLASS B SHARES $195 $603
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 105 of 159
<PAGE>
ARMADA TREASURY PLUS MONEY MARKET FUND
FUND SUMMARY
<TABLE>
<S> <C>
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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
</TABLE>
PRINCIPAL INVESTMENT STRATEGIES 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.
Page 106 of 159
<PAGE>
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. For additional information about risks, see "More Information
About Risk."
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 MAXIMUM 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 0.40%
Distribution and Service (12b-1) Fees(1) 0.10%
Other Expenses(2) 0.31%
-----
Total Annual Fund Operating Expenses 0.81%
- --------------------------------------------------------------------- ----------------------
</TABLE>
(1)The Administrator plans to waive a portion of its fees for the current fiscal
year. The Administrator may revise or cancel this expense limitation at any time
and will notify you of any material change.
(2)"Other Expenses" are based on estimated amounts for the current fiscal year.
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 $83 $259
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 107 of 159
<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 have Armada Equity Growth Fund
characteristics of both fixed income and equity Armada Equity Income Fund
securities. The value of the convertible security tends Armada Balanced Allocation Fund
to move with the market value of the underlying stock, Armada Mid Cap Growth Fund
but may also be affected by interest rates, credit Armada Large Cap Ultra Fund
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
Page 108 of 159
<PAGE>
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 Armada GNMA Fund Fund
a 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 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
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
Armada 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 109 of 159
<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.
Page 110 of 159
<PAGE>
In addition, the Fund's concentration of Armada Ohio Tax Exempt Bond
Fund investments in issuers located in a single Armada Pennsylvania Municipal Bond Fund
state 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 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.
FOREIGN SECURITY RISKS-- Investments in securities of foreign Armada International Equity Fund
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
Page 111 of 159
<PAGE>
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. Investment
in sovereign debt obligations by certain Funds involves risks
not present in debt obligations of corporate issuers. The
issuer of the debt or the governmental authorities that
control the repayment of the debt may be unable or unwilling
to repay principal or interest when due in accordance with
the terms of such debt, and a Fund may have limited recourse
to compel payment in the event of a default. Periods of
economic uncertainty may result in volatility of market
prices of sovereign debt, and in turn a Fund's NAV, to a
greater extent than the volatility inherent in debt
obligations of U.S. issuers. 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 rates Armada Core Equity Fund
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.
Page 112 of 159
<PAGE>
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 113 of 159
<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 exchange-traded Armada GNMA Fund
futures and options, due to market conditions Armada Enhanced Income Fund
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
Armada Treasury Plus Money Market Fun
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. 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
Page 114 of 159
<PAGE>
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
The Funds may use futures contracts and related Armada Mid Cap Growth Fund
options for bona fide hedging purposes to offset Armada U.S. Government Income Fund
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
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.
Page 115 of 159
<PAGE>
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.
Page 116 of 159
<PAGE>
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 117 of 159
<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 June 30, 1999, IMC had approximately $25.4 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 teams responsible for each fund as well
as the advisory fees IMC received for each fund for the fiscal period ended May
31, 1999.
Page 118 of 159
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ADVISORY FEES PAID AS A
PERCENTAGE OF AVERAGE NET
ASSETS FOR THE FISCAL
FUND NAME MANAGEMENT TEAM/INVESTMENT ADVISER YEAR ENDED MAY 31, 1999
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Equity Fund International Equity Team 1.04% (1)
- -----------------------------------------------------------------------------------------------------------------------
Small Cap Value Fund Equity Value Team 0.92% (1)
- -----------------------------------------------------------------------------------------------------------------------
Small Cap Growth Fund Equity Growth Team 0.93% (1)
- -----------------------------------------------------------------------------------------------------------------------
Equity Growth Fund Equity Growth Team 0.75%
- -----------------------------------------------------------------------------------------------------------------------
Tax Managed Equity Fund Equity Growth Team 0.57%
- -----------------------------------------------------------------------------------------------------------------------
National Asset Management Corporation
Core Equity Fund (sub-adviser) 0.75%
- -----------------------------------------------------------------------------------------------------------------------
Equity Index Fund Equity Team 0.00%
- -----------------------------------------------------------------------------------------------------------------------
Equity Income Fund Equity Value Team 0.75%
- -----------------------------------------------------------------------------------------------------------------------
Balanced Allocation Fund Equity and Fixed Income Teams 0.75% (2)
- -----------------------------------------------------------------------------------------------------------------------
National Asset Management Corporation
Total Return Advantage Fund (sub-adviser) 0.35%
- -----------------------------------------------------------------------------------------------------------------------
Bond Fund Taxable Fixed Income Team 0.55%
- -----------------------------------------------------------------------------------------------------------------------
Intermediate Bond Fund Taxable Fixed Income Team 0.40%
- -----------------------------------------------------------------------------------------------------------------------
GNMA Fund Taxable Fixed Income Team 0.55%
- -----------------------------------------------------------------------------------------------------------------------
Enhanced Income Fund Taxable Fixed Income Team 0.22% (1)
- -----------------------------------------------------------------------------------------------------------------------
Ohio Tax Exempt Bond Fund Tax Exempt Fixed Income Team 0.05% (1)
- -----------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Bond Fund Tax Exempt Fixed Income Team 0.20%
- -----------------------------------------------------------------------------------------------------------------------
National Tax Exempt Bond Fund Tax Exempt Fixed Income Team 0.04% (1)
- -----------------------------------------------------------------------------------------------------------------------
Ohio Municipal Money Market Fund Tax Exempt Money Market Team 0.13% (1)(2)
- -----------------------------------------------------------------------------------------------------------------------
Pennsylvania Tax Exempt Money Market
Fund Tax Exempt Money Market Team 0.15%
- -----------------------------------------------------------------------------------------------------------------------
Tax Exempt Money Market Fund Tax Exempt Money Market Team 0.15%
- -----------------------------------------------------------------------------------------------------------------------
Money Market Fund Taxable Money Market Team 0.25%
- -----------------------------------------------------------------------------------------------------------------------
Government Money Market Fund Taxable Money Market Team 0.25%
- -----------------------------------------------------------------------------------------------------------------------
Treasury Money Market Fund Taxable Money Market Team 0.25%
- -----------------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund Equity Growth Team 1.00% (3)
- -----------------------------------------------------------------------------------------------------------------------
Large Cap Ultra Fund Equity Growth Team 0.75% (3)
- -----------------------------------------------------------------------------------------------------------------------
U.S. Government Income Fund Taxable Fixed Income Team 0.55% (3)
- -----------------------------------------------------------------------------------------------------------------------
Michigan Municipal Bond Fund Tax Exempt Fixed Income Team 0.55% (3)
- -----------------------------------------------------------------------------------------------------------------------
Treasury Plus Money Market Fund Taxable Fixed Income Team 0.30% (3)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Advisor fee or waiver changed during the period
(2) Annualized
(3) The Fund has not yet commenced operations
Page 119 of 159
<PAGE>
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.
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 investors purchasing shares through a Planned Investment Program, the
minimum initial investment is $50.
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,
- - Internet,
- - Wire, 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, website www.armadafunds.com or ACH, 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 must indicate this option on your application. Call 1-800-622-FUND to
request a wire transfer. If you call by 4 p.m. Eastern time, your payment will
normally be wired to your bank on the next business day. The Fund may charge a
wire transfer fee. Note: Your financial institution may charge a wire transfer
fee.
BUYING OR SELLING SHARES THROUGH A FINANCIAL INTERMEDIARY
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.
Page 120 of 159
<PAGE>
Your investment representative is responsible for transmitting all subscription
and redemption requests, investment information, documentation and money to the
Fund on time. Certain investment representatives have agreements with the Funds
that allow them to enter confirmed purchase or redemption orders on behalf of
clients and customers. Under this arrangement, the investment representative
must send your payment to the funds by the time they price their shares on the
following day. If your investment representative fails to do so, it may be
responsible for any resulting fees or losses.
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 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.
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) the following business day.
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.
Page 121 of 159
<PAGE>
NON-MONEY MARKET FUNDS
In calculating NAV, a non-money market fund generally values its investment
portfolio at market price. In the event that a sale of a particular fixed income
security is not reported for that day, fixed income securities are priced at the
mean between the most recent quoted bid and asked prices. Unlisted securities
and securities traded on a national securities market for which market
quotations are readily available are valued at the mean between the most recent
bid and asked prices. In the event that a sale of a particular equity security
is not reported for that day, shares are priced at the last bid quotation. 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.
MONEY MARKET FUNDS
In calculating NAV for the money market funds, 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 buy and hold Fund shares.
MINIMUM PURCHASES
To purchase shares for the first time, you must invest in any Fund at least:
<TABLE>
<CAPTION>
CLASS DOLLAR AMOUNT
<S> <C>
Class A Shares $500
Class B Shares $500
</TABLE>
There is no minimum for subsequent investments.
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.
Page 122 of 159
<PAGE>
The amount of any front-end sales charge included in your offering price varies,
depending on the amount of your investment:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY, SMALL CAP VALUE, SMALL CAP GROWTH, EQUITY GROWTH, TAX MANAGED EQUITY, CORE EQUITY,
EQUITY INCOME AND MID CAP GROWTH FUNDS
- ------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
BALANCED ALLOCATION, TOTAL RETURN ADVANTAGE, BOND, INTERMEDIATE BOND, GNMA, NATIONAL TAX EXEMPT BOND, U.S.
GOVERNMENT INCOME AND MICHIGAN MUNICIPAL BOND FUNDS
- ------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ENHANCED INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
EQUITY INDEX FUND
- ------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------
Page 123 of 159
<PAGE>
<CAPTION>
OHIO TAX EXEMPT BOND AND PENNSYLVANIA MUNICIPAL BOND FUNDS
- ------------------------------------------------------------------------------------------------------------------------
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>
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
(spouse, parents, siblings, children and grandchildren);
- - 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 of 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
though "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 180 days. 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 180 days of your redemption. IN ADDITION, YOU
MUST NOTIFY THE FUND WHEN YOU SEND IN YOUR PURCHASE ORDER THAT YOU ARE
REPURCHASING SHARES.
Page 124 of 159
<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 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 or you redeem the entire amount within one year from the time of
fulfillment, 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. YOU MUST NOTIFY THE FUND OF THE PURCHASES THAT
QUALIFY FOR THIS DISCOUNT.
Page 125 of 159
<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 in good order, 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
YEARS SINCE PURCHASE PERCENTAGE OF 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 distributions 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;
- - exchanges of B Shares between funds of the Trust; and
- - distributions of less than 10% of the annual account value under a Systematic
Withdrawal Plan.
Page 126 of 159
<PAGE>
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 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.
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,
Internet (www.armadafunds.com) or telephone at 1-800-622-FUND (3863). The
minimum amount for telephone and Internet redemptions is $100.
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 for redemption requests received in good order
by the Fund will be the next NAV determined less, in the case of Class B
Shares, any applicable deferred sales charge. Good order means that your
request includes complete information on your purchase, exchange or
redemption and that the Fund has received the appropriate assets.
When an Investor redeems his or her B shares, the redemption order is
processed to minimize the amount of the contingent deferred sales charge that
will be charged. B shares are redeemed first from those B shares that are not
subject to the deferred sales load (i.e., B shares that were acquired through
reinvestment of dividends or capital gain distributions) and thereafter,
unless otherwise designated by the shareholder, from the B shares that have
been held the longest.
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. There will be no CDSC on Investor B Shares, as long as the
amounts withdrawn do not exceed 10% annually of the account value.
Page 127 of 159
<PAGE>
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within seven days after we receive
your request. Your proceeds can be wired to your bank account or sent to you
by check. Armada Funds does not charge a fee to wire your funds; however,
your institution may charge a fee. IF YOU RECENTLY PURCHASED YOUR SHARES BY
CHECK, 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. The Armada
Tax Managed Equity Fund may fund redemptions of $1 million or more with
appreciated securities rather than cash.
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, Internet 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 $500.
The exchange privilege is a convenient way to respond to changes in
investment goals or in market conditions. This privilege is not designed for
market-timing - switching money into investments in anticipation of rising
prices or taking money out in anticipation of the market falling. As money is
shifted in and out, a fund incurs expenses for buying and selling securities.
These costs are borne by all fund shareholders, including the long-term
investors who do not generate the costs. Therefore, the Fund discourages
short-term trading by, among other things, limiting the number of exchanges
to one exchange every two months during a given 12-month period beginning
upon the date of the first exchange transaction. Management of the Trust
reserves the right to limit, amend or impose charges upon, terminate or
otherwise modify the exchange privilege. You will be provided 60 days' notice
before any material action is taken.
Page 128 of 159
<PAGE>
IF YOU RECENTLY PURCHASED SHARES BY CHECK, 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).
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. 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.
Page 129 of 159
<PAGE>
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:
<TABLE>
<CAPTION>
Class A Class B
------- -------
<S> <C> <C>
Armada International Equity Fund 0.04% 0.75%
Armada Small Cap Value Fund 0.04% 0.75%
Armada Small Cap Growth Fund 0.04% 0.75%
Armada Equity Growth Fund 0.04% 0.75%
Armada Tax Managed Equity Fund 0.04% 0.75%
Armada Core Equity Fund 0.04% 0.75%
Armada Equity Index Fund 0.00% N/A
Armada Equity Income Fund 0.04% 0.75%
Armada Balanced Allocation Fund 0.04% 0.75%
Armada Total Return Advantage Fund 0.00% 0.75%
Armada Bond Fund 0.04% 0.75%
Armada Intermediate Bond Fund 0.04% 0.75%
Armada GNMA Fund 0.04% 0.75%
Armada Enhanced Income Fund 0.00% 0.75%
Armada Ohio Tax Exempt Bond Fund 0.04% N/A
Armada Pennsylvania Municipal Bond Fund 0.00% N/A
Armada National Tax Exempt Bond Fund 0.04% 0.75%
Armada Ohio Municipal Money Market Fund 0.04% N/A
Armada Pennsylvania Tax Exempt Money Market Fund 0.04% N/A
Armada Tax Exempt Money Market Fund 0.04% N/A
Armada Money Market Fund 0.04% 0.75%
Armada Government Money Market Fund 0.04% N/A
Armada Treasury Money Market Fund 0.04% N/A
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 130 of 159
<PAGE>
DIVIDENDS AND TAXES
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 Monthly*
Armada Large Cap Ultra Fund Monthly*
Armada U.S. Government Income Fund Monthly*
Armada Michigan Municipal Bond Fund Monthly*
Armada Treasury Plus Money Market Fund Monthly*
</TABLE>
* As of the printing of this prospectus, these Funds have not yet commenced
operations.
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.
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
Page 131 of 159
<PAGE>
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 (or an in-kind
redemption), 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
Page 132 of 159
<PAGE>
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 133 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
The tables that follow present 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, except for the financial highlights of the Bond Fund, GNMA Fund,
Pennsylvania Municipal Fund and Pennsylvania Tax Exempt Money Market Fund for
each Fund's respective commencement of operations date through May 31, 1996, has
been audited by Ernst & Young LLP, independent auditors. Their report, along
with each Fund's financial statements, appears in the annual report that
accompanies our Statement of Additional Information. The financial highlights of
the Bond Fund, GNMA Fund, Pennsylvania Municipal Fund and Pennsylvania Tax
Exempt Money Market Fund for each Fund's respective commencement of operations
date through May 31, 1996, were audited by Coopers & Lybrand, L.L.P, each Fund's
predecessor independent accountants. You can obtain the annual report, which
contains more performance information, at no charge by calling 1-800-622-FUND
(3863).
Page 134 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA INTERNATIONAL EQUITY FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY FOR THE PERIOD ENDED MAY
31, 1999 31, 1998
CLASS A CLASS B CLASS CLASS B(3)
A(2)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.82 $10.83 $10.00 $9.30
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.01) (0.07) 0.04 0.05
Net gain on securities (realized and unrealized) 0.10 0.08 0.79 1.48
Total from investment operations 0.09 0.01 0.83 1.53
LESS DISTRIBUTIONS
Dividends from net investment income (0.04) (0.01) (0.01) (0.00)
Total distributions (0.04) (0.01) (0.01) (0.00)
Net asset value, end of period $10.87 $10.83 $10.82 $10.83
TOTAL RETURN 0.84%(1) 0.10%(1) 8.28%(1,4)16.45%(1,4)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,127 $42 $ 276 $1
Ratio of expenses to average net assets 1.68% 2.43% 1.39%(5) 2.08%(5)
Ratio of net investment income/(loss) to average net
assets (0.04)% (0.80)% 1.49%(5) 0.59%(5)
Ratio of expenses to average net assets before fee
waivers 1.68% 2.43% 1.47%(5) 2.14%(5)
Ratio of net investment income/(loss) to average net
assets before fee waivers (0.04)% (0.80)% 1.41%(5) 0.53%(5)
Portfolio turnover rate 78% 78% 28% 28%
</TABLE>
(1) TOTAL RETURN EXCLUDES SALES CHARGE.
(2) CLASS A COMMENCED OPERATIONS ON AUGUST 1, 1997.
(3) CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
(4) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(5) ANNUALIZED.
Page 135 or 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA SMALL CAP VALUE FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE
PERIOD ENDED
FOR THE YEAR ENDED MAY 31, MAY 31,
1999 1998 1997 1996 1995
CLASS A CLASS B CLASS A CLASS B(4) CLASS A CLASS A CLASS A(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.47 $15.42 $14.95 $15.28 $12.94 $11.26 $10.16
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.06 (0.03) 0.01 0.00 0.08 0.06 0.07
Net gain/(loss) on securities (realized and
unrealized) (0.85) (0.87) 2.84 0.14 2.83 2.37 1.11
Total from investment operations (0.79) (0.90) 2.85 0.14 2.91 2.43 1.18
LESS DISTRIBUTIONS
Dividends from net investment income (0.04) (0.00) (0.04) (0.00) (0.05) (0.06) (0.04)
Dividends in excess of net investment income (0.00) (0.00) (0.00) (0.00) (0.00) (0.02) (0.00)
Distributions from net realized capital gains (1.33) (1.33) (2.29) (0.00) (0.85) (0.67) (0.04)
Total distributions (1.37) (1.33) (2.33) (0.00) (0.90) (0.75) (0.08)
Net asset value, end of period $ 13.31 $13.19 $ 15.47 $15.42 $14.95 $12.94 $11.26
TOTAL RETURN (4.38)%(3) (5.13)%(3) 19.51%(3) 19.12%(2,3) 23.26%(3) 22.28%(3) 14.80%(3,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $11,542 $515 $10,634 $61 $4,929 $4,702 $3,567
Ratio of expenses to average net assets 1.38% 2.08% 1.23% 1.92%(2) 1.22% 1.30% 1.34%(2)
Ratio of net investment income/(loss) to average
net assets 0.44% (0.26)% 0.19% (0.48)%(2) 0.57% 0.58% 1.09%(2)
Ratio of expenses to average net assets before fee
waivers 1.38% 2.08% 1.23% 1.92%(2) 1.22% 1.32% 1.38%(2)
Ratio of net investment income/(loss) to average
net assets before fee waivers 0.44% (0.26)% 0.19% (0.48)%(2) 0.51% 0.56% 1.05%(2)
Portfolio turnover rate 79% 79% 89% 89% 64% 106% 69%
</TABLE>
(1) CLASS A COMMENCED OPERATIONS ON AUGUST 15, 1994.
(2) ANNUALIZED.
(3) TOTAL RETURN EXCLUDES SALES CHARGE.
(4) CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
(5) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
Page 136 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA SMALL CAP GROWTH FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE PERIOD ENDED
MAY 31, 1999 MAY 31, 1998
CLASS A CLASS B CLASS A(3) CLASS B(4)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.68 $11.66 $10.00 $10.64
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.05)(6) (0.10)(6) 0.01 (0.01)
Net gain/(loss) on securities (realized and unrealized) (1.41) (1.44) 1.71 1.03
Total from investment operations (1.46) (1.54) 1.72 1.02
LESS DISTRIBUTIONS
Dividends from net investment income (0.00) (0.00) (0.01) (0.00)
Distributions from net realized capital gains (0.11) (0.11) (0.03) (0.00)
Total distributions (0.11) (0.11) (0.04) (0.00)
Net asset value, end of period $10.11 $10.01 $11.68 $11.66
TOTAL RETURN (12.54)%(1) (13.26)%(1) 17.18%(1,2) 9.59%(1,2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,089 $139 $331 $1
Ratio of expenses to average net assets 1.51% 2.23% 1.23%(5) 1.92%(5)
Ratio of net investment income/(loss) to average net
assets (0.51)% (1.23)% (0.32)%(5) (0.87)%(5)
Ratio of expenses to average net assets before fee
waivers 1.51% 2.23% 1.34%(5) 3.06%(5)
Ratio of net investment income/(loss) to average net
assets before fee waivers (0.51)% (1.23)% (0.43)%(5) (2.01)%(5)
Portfolio turnover rate 159% 159% 31% 31%
</TABLE>
(1) TOTAL RETURN EXCLUDES SALES CHARGE.
(2) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(3) CLASS A COMMENCED OPERATIONS ON AUGUST 1, 1997.
(4) CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
(5) ANNUALIZED.
(6) CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
Page 137 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA EQUITY GROWTH FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
CLASS A CLASS B CLASS A CLASS B(3) CLASS A CLASS A CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $21.35 $21.28 $18.67 $19.44 $18.05 $14.79 $13.68
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.09)(4) (0.27)(4) (0.04) (0.24) 0.05 0.10 0.18
Net gain on securities (realized and unrealized) 4.28 4.31 4.99 2.08 4.66 3.47 1.21
Total from investment operations 4.19 4.04 4.95 1.84 4.71 3.57 1.39
LESS DISTRIBUTIONS
Dividends from net investment income (0.00) (0.00) (0.00) (0.00) (0.05) (0.10) (0.17)
Dividends in excess of net investment income (0.00) (0.00) (0.00) (0.00) (0.01) (0.02) (0.00)
Distributions from net realized capital gains (0.99) (0.99) (2.27) (0.00) (4.03) (0.19) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.11)
Total distributions (0.99) (0.99) (2.27) (0.00) (4.09) (0.31) (0.28)
Net asset value, end of period $24.55 $24.33 $21.35 $21.28 $18.67 $18.05 $14.79
TOTAL RETURN 19.88%(1) 19.22%(1) 28.32%(1) 27.90%(1,2) 29.24%(1) 24.34%(1) 10.35%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $156,356 $1,400 $12,380 $24 $6,931 $6,013 $5,974
Ratio of expenses to average net assets 1.17% 1.88% 1.23% 1.92%(2) 1.22% 1.26% 1.27%
Ratio of net investment income/(loss) to average net
assets (0.36)% (1.07)% (0.26)% (0.92)%(2) 0.25% 0.60% 1.23%
Ratio of expenses to average net assets before fee
waivers 1.17% 1.88% 1.23% 1.92%(2) 1.22% 1.28% 1.28%
Ratio of net investment income/(loss) to average net
assets before fee waivers (0.36)% (1.07)% (0.26)% (0.92)%(2) 0.25% 0.58% 1.22%
Portfolio turnover rate 57% 57% 260% 260% 197% 74% 17%
</TABLE>
(1) TOTAL RETURN EXCLUDES SALES CHARGE.
(2) ANNUALIZED.
(3) CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
(4) CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
Page 138 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA TAX MANAGED EQUITY FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1999 FOR THE PERIOD ENDED MAY 31,
CLASS A CLASS B CLASS A(2) CLASS B(3)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.93 $9.93 $10.10 $10.21
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.04 (0.02) (0.00) (0.00)
Net gain/(loss) loss on securities (realized and
unrealized) 2.24 2.23 (0.17) (0.28)
Total from investment operations 2.28 2.21 (0.17) (0.28)
LESS DISTRIBUTIONS
Dividends from net investment income (0.04) (0.01) (0.00) (0.00)
Distributions from net realized capital gains (0.01) (0.01) (0.00) (0.00)
Total distributions (0.05) (0.02) (0.00) (0.00)
Net asset value, end of period $12.16 $12.12 $9.93 $9.93
TOTAL RETURN 23.03%(1) 22.31%(1) (23.63%)(1,4) (32.24%)(1,4)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $7,353 $5,377 $10 $85
Ratio of expenses to average net assets 1.09% 1.79% 0.54%(4) 1.23%(4)
Ratio of net investment income/(loss) to average net
assets 0.11% (0.59%) 0.63%(4) 0.43%(4)
Ratio of expenses to average net assets before fee
waivers 1.27% 1.97% 1.24%(4) 1.98%(4)
Ratio of net investment income/(loss) to average net
assets before fee waivers (0.07%) (0.77%) (0.07%)(4) 1.18%(4)
Portfolio turnover rate 5% 5% 0% 0%
</TABLE>
(1) TOTAL RETURN EXCLUDES SALES CHARGE.
(2) CLASS A COMMENCED OPERATIONS ON MAY 11, 1998.
(3) CLASS B COMMENCED OPERATIONS ON MAY 4, 1998.
(4) ANNUALIZED.
Page 139 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA CORE EQUITY FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1999 FOR THE PERIOD ENDED MAY 31,
CLASS A CLASS B CLASS A(3) CLASS B(4)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.34 $11.33 $10.00 $10.25
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.05)(6) (0.16)(6) 0.04 0.00
Net gain on securities (realized and unrealized) 2.93 2.97 1.34 1.08
Total from investment operations 2.88 2.81 1.38 1.08
LESS DISTRIBUTIONS
Dividends from net investment income (0.00) (0.00) (0.04) (0.00)
Distributions from net realized capital gains (0.51) (0.51) (0.00) (0.00)
Total distributions (0.51) (0.51) (0.04) 0
Net asset value, end of period $13.71 $13.63 $11.34 $11.33
TOTAL RETURN 25.78%(1) 25.17%(1) 13.85%(1,2) 10.54%(1,2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,731 $1,106 $408 $2
Ratio of expenses to average net assets 1.23% 1.94% 1.14%(5) 1.83%(5)
Ratio of net investment income/(loss) to average net
assets (0.40)% (1.11%) 0.14%(5) (0.51)%(5)
Ratio of expenses to average net assets before fee
waivers 1.23% 1.94% 1.30%(5) 2.00%(5)
Ratio of net investment income/(loss) to average net
assets before fee waivers (0.40)% (1.11%) 0.04%(5) (0.50)%(5)
Portfolio turnover rate 43% 43% 60% 60%
</TABLE>
(1) TOTAL RETURN EXCLUDES SALES CHARGE.
(2) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(3) CLASS A COMMENCED OPERATIONS ON AUGUST 1, 1997.
(4) CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
(5) ANNUALIZED.
(6) CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
Page 140 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA EQUITY INDEX FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
MAY 31, 1999
CLASS A(1)
<S> <C>
Net asset value, beginning of period $9.09
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.07
Net gain on securities (realized and unrealized) 2.18
Total from investment operations 2.25
LESS DISTRIBUTIONS
Dividends from net investment income (0.05)
Total distributions (0.05)
Net asset value, end of period $11.29
TOTAL RETURN 24.83%(2,3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $3,892
Ratio of expenses to average net assets 0.36%(4)
Ratio of net investment income to average net assets 1.22%(4)
Ratio of expenses to average net assets before fee
waivers 0.71%(4)
Ratio of net investment income to average net assets 0.87%(4)
before fee waivers
Portfolio turnover rate 9%
</TABLE>
(1) CLASS A COMMENCED OPERATIONS ON OCTOBER 15, 1998.
(2) TOTAL RETURN EXCLUDES SALES CHARGE.
(3) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(4) ANNUALIZED.
Page 141 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA EQUITY INCOME FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE
PERIOD ENDED
FOR THE YEAR ENDED MAY 31, MAY 31,
1999 1998 1997 1996 1995
CLASS A CLASS B CLASS A CLASS B(4) CLASS A CLASS A CLASS A(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.51 $17.54 $ 14.86 $16.28 $12.65 $11.01 $10.26
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.21 0.17 0.26 0.46 0.31 0.33 0.26
(Net gain on securities realized and unrealized) 1.55 1.39 3.41 0.86 2.68 1.77 0.75
Total from investment operations 1.76 1.56 3.67 1.32 2.99 2.10 1.01
LESS DISTRIBUTIONS
Dividends from net investment income (0.23) (0.16) (0.29) (0.06) (0.27) (0.32) (0.26)
Distributions from net realized capital gains (0.25) (0.25) (0.73) (0.00) (0.51) (0.14) (0.00)
Total distributions (0.48) (0.41) (1.02) (0.06) (0.78) (0.46) (0.26)
Net asset value, end of period $18.79 $18.69 $17.51 $17.54 $14.86 $12.65 $11.01
TOTAL RETURN 10.40%(3) 9.14%(3) 25.41%(3) 25.58%(2,3) 24.33%(3) 19.37%(3) 13.18%(2,3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $11,075 $997 $2,151 $3 $410 $263 $125
Ratio of expenses to average net assets 1.18% 1.89% 1.17% 1.86%(2) 1.26% 1.31% 1.41%(2)
Ratio of net investment income to average
net assets 1.82% 1.11% 1.62% 0.68%(2) 2.17% 2.75% 3.45%(2)
Ratio of expenses to average net assets
before fee waivers
Ratio of net investment income to average
net assets 1.82% 1.11% 1.62% 0.68%(2) 2.17% 2.74% 3.40%(2)
before fee waivers
Portfolio turnover rate 19% 19% 18% 18% 35% 53% 12%
</TABLE>
(1) CLASS A COMMENCED OPERATIONS ON AUGUST 22, 1994.
(2) ANNUALIZED.
(3) TOTAL RETURN EXCLUDES SALES CHARGE.
(4) CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
Page 142 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA BALANCED ALLOCATION FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
MAY 31, 1999
CLASS A(3) CLASS B(4)
<S> <C> <C>
Net asset value, beginning of period $9.74 $9.82
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.14 0.10
Net gain on securities (realized and unrealized) 0.57 0.51
Total from investment operations 0.71 0.61
LESS DISTRIBUTIONS
Dividends from net investment income (0.14) (0.10)
Total distributions (0.14) (0.10)
Net asset value, end of period $10.31 $10.33
TOTAL RETURN 7.26%(1,2) 6.07%(1,2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,466 $385
Ratio of expenses to average net assets 1.31%(5) 2.02%(5)
Ratio of net investment income to average net assets 2.50%(5) 1.29%(5)
Ratio of expenses to average net assets before fee waivers 1.31%(5) 2.02%(5)
Ratio of investment income to average net assets before
fee waivers 2.50%(5) 1.29%(5)
Portfolio turnover rate 116% 116%
</TABLE>
(1) TOTAL RETURN EXCLUDES SALES CHARGE.
(2) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(3) CLASS A COMMENCED OPERATIONS ON JULY 31, 1998.
(4) CLASS B COMMENCED OPERATIONS ON NOVEMBER 11, 1998.
(5) ANNUALIZED.
Page 143 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA TOTAL RETURN ADVANTAGE FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
FOR THE PERIOD
1999 1998 1997 1996 ENDED MAY 31, 1995
CLASS A CLASS A CLASS A CLASS A CLASS A(1)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.25 $9.89 $9.87 $10.54 $10.16
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.56 0.61 0.64 0.62(5) 0.49(5)
Net gain/ (loss) on securities (realized and unrealized) (0.23) 0.36 0.16 (0.22) 0.40
Total from investment operations 0.33 0.97 0.80 0.40 0.89
LESS DISTRIBUTIONS
Dividends from net investment income (0.56) (0.61) (0.64) (0.62) (0.49)
Dividends in excess of net investment income (0.00) (0.00) (0.00) (0.14) (0.02)
Distributions from net realized capital gains (0.04) (0.00) (0.00) (0.31) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.00) (0.14) (0.00) (0.00)
Total distributions (0.60) (0.61) (0.78) (1.07) (0.51)
Net asset value, end of period $9.98 $10.25 $9.89 $9.87 $10.54
TOTAL RETURN 3.18%(3) 10.08%(3) 8.35%(3) 3.74%(3) 12.65%(3,4)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $4,686 $640 $2,186 $2,040 $106
Ratio of expenses to average net assets 0.69% 0.54% 0.41% 0.36% 0.31%(2)
Ratio of net investment income to average net assets 5.48% 6.14% 6.46% 6.12% 6.92%(2)
Ratio of expenses to average net assets before
fee waivers 0.89% 0.97% 0.96% 0.89% 0.87%(2)
Ratio of net investment income to average net assets
before fee waivers 5.28% 5.71% 5.91% 5.59% 6.36%(2)
Portfolio turnover rate 142% 170% 169% 268% 166%
</TABLE>
(1) CLASS A COMMENCED OPERATIONS ON SEPTEMBER 6, 1994.
(2) ANNUALIZED.
(3) TOTAL RETURN EXCLUDES SALES CHARGE.
(4) TOTAL RETURNS HAVE BEEN ANNUALIZED BASED UPON THE PERIOD FROM EACH CLASS'
COMMENCEMENT DATE THROUGH MAY 31, 1995. GROSS TOTAL RETURNS OF CLASS A FOR
THE PERIOD WERE 9.14%.
(5) CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
Page 144 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
1999 1998 1997
CLASS A CLASS B CLASS A CLASS B(6) CLASS A(4)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.27 $10.26 $10.02 $10.35 $9.97
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.54 0.47 0.56 0.47 0.41
Net gain/(loss) on securities (realized and unrealized) (0.15) (0.15) 0.25 (0.09) 0.13
Total from investment operations 0.39 0.32 0.81 0.38 0.54
LESS DISTRIBUTIONS
Dividends from net investment income (0.54) (0.47) (0.56) (0.47) (0.41)
Distributions from net realized capital gains (0.14) (0.14) (0.00) (0.00) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.00) (0.00) (0.00) (0.08)
Total distributions (0.68) (0.61) (0.56) (0.47) (0.49)
Net asset value, end of period $9.98 $9.97 $10.27 $10.26 $10.02
TOTAL RETURN 3.77%(5) 3.06%(5) 8.29%(5) 8.36%(1,5) 7.22%(1,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $2,804 $725 $161 $1 $23
Ratio of expenses to average net assets 0.96% 1.66% 1.05% 1.74%(1) 1.07%(1)
Ratio of net investment income to average net assets 5.18% 4.48% 5.52% 2.71%(1) 5.64%(1)
Ratio of expenses to average net assets before fee waivers 0.96% 1.66% 1.05% 1.74%(1) 1.07%(1)
Ratio of net investment income to average net assets 5.18% 4.48% 5.52% 2.71%(1) 5.64%(1)
before fee waivers
Portfolio turnover rate 270% 270% 220% 220% 96%
<CAPTION>
FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
ENDED MAY ENDED APRIL ENDED APRIL
31, 1996(3) 30, 1996(3) 30, 1995(3)
<S> <C> <C> <C>
Net asset value, beginning of period $10.04 $10.02 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income
Net gain/(loss) on securities (realized and unrealized) 0.05 0.64 0.44
Total from investment operations (0.07) 0.07 0.02
(0.02) 0.71 0.46
LESS DISTRIBUTIONS
Dividends from net investment income
Distributions from net realized capital gains (0.05) (0.64) (0.44)
Distributions in excess of net realized capital gains (0.00) (0.05) (0.00)
Total distributions (0.00) (0.00) (0.00)
Net asset value, end of period (0.05) (0.69) (0.44)
$9.97 $10.04 $10.02
TOTAL RETURN
(0.19)%(2,5) 7.09%(5) 4.75%(2,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)
Ratio of expenses to average net assets $88,829 $89,901 $53,316
Ratio of net investment income to average net assets 0.85%(1) 0.85% 0.85%(1)
Ratio of expenses to average net assets before fee waivers 5.88%(1) 6.20% 6.17%(1)
Ratio of net investment income to average net assets 1.25%(1) 1.25% 1.33%(1)
before fee waivers 5.48%(1) 5.80% 5.69%(1)
Portfolio turnover rate 2% 94% 172%
</TABLE>
(1) ANNUALIZED.
(2) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(3) ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF A PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON
AUGUST 10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL
YEAR-END FROM APRIL 30 TO MAY 31.
(4) CLASS A COMMENCED OPERATIONS ON SEPTEMBER 11, 1996.
(5) TOTAL RETURN EXCLUDES SALES CHARGE. 6 CLASS B SHARES COMMENCED OPERATIONS
JANUARY 6, 1998.
Page 145 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA INTERMEDIATE BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
CLASS A CLASS B CLASS A CLASS B(3) CLASS A CLASS A CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.63 $10.63 $10.42 $10.70 $10.35 $10.60 $10.30
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.54 0.45 0.58 0.2 0.57 0.59 0.61
Net gain/ (loss) on securities (realized and unrealized) (0.16) (0.15) 0.21 (0.07) 0.07 (0.23) 0.30
Total from investment operations 0.38 0.30 0.79 0.13 0.64 0.36 0.91
LESS DISTRIBUTIONS
Dividends from net investment income (0.54) (0.46) (0.58) (0.2) (0.57) (0.59) (0.61)
Distributions from net realized capital gains (0.06) (0.06) (0.00) (0.00) (0.00) (0.00) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.00) (0.00) (0.00) (0.00) (0.02) (0.00)
Total distributions (0.60) (0.52) (0.58) (0.2) (0.57) (0.61) (0.61)
Net asset value, end of period $10.41 $10.41 $10.63 $10.63 $10.42 $10.35 $10.60
TOTAL RETURN 3.54%(1) 2.83%(1) 7.71%(1) 7.39%(1,2) 6.36%(1) 3.44%(1) 9.26%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $5,129 $709 $3,288 $2 $3,720 $6,216 $5,527
Ratio of expenses to average net assets 0.86% 1.57% 0.91% 1.60%(2) 0.96% 1.04% 1.09%
Ratio of net investment income to average net assets 4.96% 4.25% 5.48% 3.38%(2) 5.52% 5.50% 5.95%
Ratio of expenses to average net assets before fee waivers 1.00% 1.71% 1.06% 1.49%(2) 1.05% 1.06% 1.10%
Ratio of net investment income To average net assets 4.82% 4.11% 5.33% 3.49%(2) 5.44% 5.48% 5.94%
before fee waivers
Portfolio turnover rate 256% 256% 160% 160% 217% 45% 42%
</TABLE>
(1) TOTAL RETURN EXCLUDES SALES CHARGE.
(2) ANNUALIZED.
(3) CLASS B SHARES COMMENCED OPERATIONS JANUARY 6, 1998.
Page 146 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA GNMA FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
FOR THE FOR THE FOR THE
PERIOD ENDED YEAR ENDED PERIOD ENDED
1999 1998 1997 MAY 31, APRIL 30, APRIL 30,
CLASS A CLASS A CLASS A(4) 1996(3) 1996(3) 1995(3)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.36 $10.15 $10.02 $ 10.12 $ 10.16 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.59 0.58 0.45 0.05 0.66 0.48
Net gain/(loss) on securities (realized and unrealized) (0.20) 0.31 0.23 (0.09) 0.14 0.16
Total from investment operations 0.39 0.89 0.68 (0.04) 0.80 0.64
LESS DISTRIBUTIONS
Dividends from net investment income (0.58) (0.58) (0.45) (0.05) (0.66) (0.48)
Dividends from net realized capital gains (0.07) (0.10) (0.01) (0.00) (0.18) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.00) (0.09) (0.00) (0.00) (0.00)
Total distributions (0.65) (0.68) (0.55) (0.05) (0.84) (0.48)
Net asset value, end of period $10.10 $10.36 $10.15 $ 10.03 $ 10.12 $ 10.16
TOTAL RETURN 3.77%(5) 8.90%(5) 8.83%(1,5) (0.35)%(2,5) 7.97%(5) 6.61%(2,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,497 $ 549 $ 128 $60,532 $62,161 $42,212
Ratio of expenses to average net assets 1.03% 1.09% 1.12%(1) 0.85%(1) 0.85% 0.85%(1)
Ratio of net investment income to average net assets 5.67% 5.54% 6.17%(1) 6.33%(1) 6.30% 6.68%(1)
Ratio of expenses to average net assets
before fee waivers 1.03% 1.09% 1.12%(1) 1.28%(1) 1.29% 1.40%(1)
Ratio of net investment income to average net assets 5.67% 5.54% 6.17%(1) 5.90%(1) 5.86% 6.13%(1)
before fee waivers
Portfolio turnover rate 85% 291% 57% 1% 149% 226%
</TABLE>
(1) ANNUALIZED.
(2) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(3) ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF THE PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON
AUGUST 10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL
YEAR-END FROM APRIL 30 TO MAY 31.
(4) CLASS A COMMENCED OPERATIONS ON SEPTEMBER 11, 1996.
(5) TOTAL RETURN EXCLUDES SALES CHARGE.
Page 147 of 159
<PAGE>
INANCIAL HIGHLIGHTS
ARMADA ENHANCED INCOME FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, FOR THE PERIOD
1999 1998 1997 1996 ENDED MAY 31, 1995
CLASS A CLASS A CLASS A CLASS A CLASS A(1)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.08 $10.00 $10.02 $10.18 $10.10
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.56 0.57 0.57 0.56 0.43(5)
Net gain/(loss) on securities (realized and unrealized) (0.05) 0.09 0.01 (0.05) 0.06
Total from investment operations 0.51 0.66 0.58 0.51 0.49
LESS DISTRIBUTIONS
Dividends from net investment income (0.55) (0.57) (0.57) (0.56) (0.41)
Dividends in excess of net investment income 0.00 (0.00) (0.00) (0.11) (0.00)
Distributions of net realized capital gains (0.05) (0.01) (0.03) (0.00) (0.00)
Total distributions (0.60) (0.58) (0.60) (0.67) (0.41)
Net asset value, end of period $9.99 $10.08 $10.00 $10.02 $10.18
4.94%(3) 6.68%(3) 5.91%(3) 5.13%(3) 6.84%(2,3,4)
TOTAL RETURN
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $550 $559 $2,051 $1,718 $2,547
Ratio of expenses to average net assets 0.53% 0.41% 0.31% 0.33% 0.32%(2)
Ratio of net investment income to average net assets 5.39% 5.65% 5.63% 5.55% 5.89%(2)
Ratio of expenses to average net assets before fee waivers 0.75% 0.80% 0.75% 0.80% 0.79%(2)
Ratio of net investment income to average net assets before 5.17% 5.26% 5.18% 5.08% 5.42%(2)
fee waivers
Portfolio turnover rate 190% 135% 225% 98% 36%
</TABLE>
(1) CLASS A COMMENCED OPERATIONS ON SEPTEMBER 9, 1994.
(2) ANNUALIZED.
(3) TOTAL RETURN EXCLUDES SALES CHARGE.
(4) TOTAL RETURNS HAVE BEEN ANNUALIZED BASED UPON THE PERIOD FROM THE
COMMENCEMENT DATE THROUGH MAY 31, 1995. GROSS TOTAL RETURNS OF THE
CLASS A FOR THE PERIOD WERE 4.92%.
(5) CALCULATION BASED UPON AVERAGE SHARES OUTSTANDING.
Page 148 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA OHIO TAX EXEMPT BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
CLASS A CLASS A CLASS A CLASS A CLASS A
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.09 $10.82 $10.66 $10.70 $10.53
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.52 0.51 0.51 0.50 0.50
Net gain/(loss) on securities (realized and unrealized) (0.08) 0.28 0.16 (0.04) 0.17
Total from investment operations 0.44 0.79 0.67 0.46 0.67
LESS DISTRIBUTIONS
Dividends from net investment income (0.52) (0.51) (0.51) (0.50) (0.50)
Distributions from net realized capital gains (0.01) (0.01) (0.00) (0.00) (0.00)
Total distributions (0.53) (0.52) (0.51) (0.50) (0.50)
Net asset value, end of period $ 11.00 $11.09 $10.82 $10.66 $10.70
TOTAL RETURN 3.93%(1) 7.39%(1) 6.38%(1) 4.35%(1) 6.64%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $4,808 $4,037 $3,535 $2,869 $3,168
Ratio of expenses to average net assets 0.38% 0.25% 0.24% 0.26% 0.24%
Ratio of net investment income to average net assets 4.67% 4.59% 4.71% 4.68% 4.82%
Ratio of expenses to average net assets before fee waivers 0.88% 0.80% 0.79% 0.83% 0.78%
Ratio of net investment income to average net assets 4.17% 4.04% 4.16% 4.11% 4.27%
before fee waivers
Portfolio turnover rate 19% 15% 23% 10% 3%
</TABLE>
(1) TOTAL RETURN EXCLUDES SALES CHARGE.
Page 149 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
FOR THE FOR THE FOR THE
PERIOD YEAR PERIOD
ENDED ENDED ENDED
MAY 31, APRIL 30, APRIL 30,
1999 1998 1997 1996(3) 1996(3) 1995(3)
CLASS A CLASS A CLASS A(4)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.45 $10.22 $10.13 $ 10.12 $10.04 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.48 0.45 0.31 0.04 0.43 0.29
Net gain/(loss) on securities (realized and unrealized) (0.04) 0.24 0.12 (0.04) 0.08 0.04
Total from investment operations 0.44 0.69 0.43 0.00 0.51 0.33
LESS DISTRIBUTIONS
Dividends from net investment income (0.48) (0.45) (0.31) (0.04) (0.43) (0.29)
Distributions from net realized capital gains (0.01) (0.00) (0.02) (0.00) (0.00) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.01) (0.01) (0.00) (0.00) (0.00)
Total distributions (0.49) (0.46) (0.34) (0.04) (0.43) (0.29)
Net asset value, end of period $10.40 $10.45 $10.22 $10.08 $10.12 $10.04
TOTAL RETURN 4.21%(5) 6.84%(5) 6.13%(1,5) (0.03)%(1,5) 5.06%(5) 3.38%(2,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $218 $125 $81 $38,733 $38,809 $34,638
Ratio of expenses to average net assets 0.58% 0.77% 0.99%(1) 0.85%(1) 0.85% 0.85%(1)
Ratio of net investment income to average net assets 4.70% 4.32% 4.26%(1) 4.32%(1) 4.16% 4.05%(1)
Ratio of expenses to average net assets before fee 0.93% 0.94% 1.00%(1) 1.31%(1) 1.24% 1.36%(1)
waivers
Ratio of net investment income to average net assets 4.35% 4.15% 4.25%(1) 3.86%(1) 3.77% 3.54%(1)
before fee waivers
Portfolio turnover rate 15% 20% 42% 0% 22% 4%
</TABLE>
(1) ANNUALIZED.
(2) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(3) ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF THE PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON
AUGUST 10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL YEAR
END FROM APRIL 30 TO MAY 31. 4 CLASS A COMMENCED OPERATIONS ON
SEPTEMBER 11, 1996.
(5) TOTAL RETURN EXCLUDES SALES CHARGE.
Page 150 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA NATIONAL TAX EXEMPT BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED MAY 31, 1999
CLASS A(2) CLASS B(5)
<S> <C> <C>
Net asset value, beginning of period $10.04 $10.23
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.41 0.13
Net gain/(loss) on securities (realized and
unrealized) (0.04) (0.26)
Total from investment operations 0.37 (0.13)
LESS DISTRIBUTIONS
Dividends from net investment income (0.41) (0.14)
Distribution from net realized capital gains (0.03) (0.00)
Total distributions (0.44) (0.14)
Net asset value, end of period $9.97 $9.96
TOTAL RETURN 3.67%(3,4) (1.22)%(3,4)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $4,205 $ 275
Ratio of expenses to average net assets 0.46%(1) 1.17%(1)
Ratio of net investment income to average net assets 4.29%(1) 3.58%(1)
Ratio of expenses to average net assets before fee 0.97%(1) 1.68%(1)
waivers
Ratio of net investment income to average net assets 3.78%(1) 3.07%(1)
before fee waivers
Portfolio turnover rate 23% 23%
</TABLE>
(1) ANNUALIZED
(2) CLASS A COMMENCED OPERATIONS ON JUNE 19, 1998.
(3) TOTAL RETURN EXCLUDES SALES CHARGE.
(4) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(5) CLASS B COMMENCED OPERATIONS ON JANUARY 29, 1999.
Page 151 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
MAY 31, 1999
CLASS A(1)
<S> <C>
Net asset value, beginning of period $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02
LESS DISTRIBUTIONS
Dividends from net investment income (0.02)
Net asset value, end of period $1.00
TOTAL RETURN 1.50%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $11,019
Ratio of expenses to average net assets 0.50%(3)
Ratio of net investment income to average net assets 2.62%(3)
Ratio of expenses to average net assets before fee waivers 0.70%(3)
Ratio of net investment income to average net assets
before fee waivers 2.42%(3)
</TABLE>
(1) CLASS A COMMENCED OPERATIONS ON NOVEMBER 2, 1998.
(2) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(3) ANNUALIZED.
Page 152 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR YEAR FOR THE FOR THE FOR THE
ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
1999 MAY 31, 1998 1997 MAY 31, APRIL 30, APRIL 30,
CLASS A CLASS A CLASS A(4) 1996(3) 1996(3) 1995(3)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.03 0.02 0.00 0.03 0.02
LESS DISTRIBUTIONS
Dividends from net investment income (0.03) (0.03) (0.02) (0.00) (0.03) (0.02)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 2.76% 3.29% 3.18%(1) 0.28%(2) 3.36% 2.32%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $53,822 $33,375 $20,830 $68,742 $70,422 $56,668
Ratio of expenses to average net assets 0.49% 0.46% 0.46%(1) 0.55%(1) 0.55% 0.55%(1)
Ratio of net investment income to average net 2.67% 3.23% 3.27%(1) 3.24%(1) 3.29% 3.21%(1)
assets
Ratio of expenses to average net assets before fee 0.74% 0.71% 0.71%(1) 0.97%(1) 0.96% 1.04%(1)
waivers
Ratio of net investment income to average net 2.42% 2.98% 3.02%(1) 2.82%(1) 2.88% 2.72%(1)
assets before fee waivers
</TABLE>
(1) ANNUALIZED.
(2) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(3) ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF THE PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON
AUGUST 10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL YEAR
END FROM APRIL 30 TO MAY 31.
(4) CLASS A COMMENCED OPERATIONS ON SEPTEMBER 11, 1996.
Page 153 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA TAX EXEMPT MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
CLASS A CLASS A CLASS A CLASS A CLASS A
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.03 0.03 0.03 0.03
LESS DISTRIBUTIONS
Dividends from net investment income (0.03) (0.03) (0.03) (0.03) (0.03)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
2.85% 3.27% 3.12% 3.29% 3.04%
TOTAL RETURN
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $190,469 $132,548 $71,917 $85,928 $51,916
Ratio of expenses to average net assets 0.44% 0.42% 0.39% 0.40% 0.46%
Ratio of net investment income to average net assets 2.78% 3.20% 3.08% 3.23% 3.17%
Ratio of expenses to average net assets before fee waivers 0.64% 0.62% 0.59% 0.61% 0.67%
Ratio of net investment income to average net assets 2.58% 3.00% 2.88% 3.02% 2.96%
before fee waivers
</TABLE>
Page 154 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA MONEY MARKET FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
CLASS A CLASS B CLASS A CLASS B(1) CLASS A CLASS A CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.04 0.05 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.04) (0.05) (0.05) (0.05) (0.05) (0.05)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN 4.82% 4.21% 5.26% 5.04%(2) 5.09% 5.35% 5.01%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,360,644 $27 $696,893 $5 $346,172 $343,087 $175,192
Ratio of expenses to average net assets 0.56% 1.27% 0.51% 1.22%(2) 0.47% 0.47% 0.47%
Ratio of net investment income to average net assets 4.68% 3.97% 5.14% 4.39%(2) 4.97% 5.18% 5.12%
Ratio of expenses to average net assets before fee 0.66% 1.37% 0.61% 1.27%(2) 0.57% 0.58% 0.58%
waivers
Ratio of net investment income to average net assets 4.58% 3.87% 5.08% 4.31%(2) 4.87% 5.07% 5.01%
before fee waivers
</TABLE>
(1) THE MONEY MARKET FUND CLASS B COMMENCED OPERATIONS JANUARY 5, 1998.
(2) ANNUALIZED.
Page 155 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA GOVERNMENT MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
CLASS A CLASS A CLASS A CLASS A CLASS A
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.05)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN 4.70% 5.17% 5.04% 5.31% 4.87%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $565,095 $247,281 $159,129 $131,194 $19,174
Ratio of expenses to average net assets 0.57% 0.52% 0.47% 0.46% 0.51%
Ratio of net investment income to average net assets 4.61% 5.05% 4.93% 5.13% 5.01%
Ratio of expenses to average net assets before fee waivers 0.67% 0.62% 0.57% 0.57% 0.63%
Ratio of net investment income to average net assets before 4.51% 4.95% 4.83% 5.02% 4.90%
fee waivers
</TABLE>
Page 156 of 159
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA TREASURY MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
CLASS A CLASS A CLASS A CLASS A CLASS
A(1)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.04 0.05 0.05 0.05 0.02
LESS DISTRIBUTIONS
Dividends from net investment income (0.04) (0.05) (0.05) (0.05) (0.02)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN 4.23% 4.82% 4.79% 4.97% 5.41%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $83,020 $7,222 $5,680 $4,355 $ 366
Ratio of expenses to average net assets 0.55% 0.51% 0.47% 0.52% 0.56%(2)
Ratio of net investment income to average net assets 4.21% 4.71% 4.68% 4.77% 5.35%(2)
Ratio of expenses to average net assets before fee waivers 0.60% 0.56% 0.52% 0.58% 0.63%(2)
Ratio of net investment income to average net assets 4.16% 4.66% 4.63% 4.71% 5.28%(2)
before fee waivers
</TABLE>
(1) CLASS A COMMENCED OPERATIONS ON DECEMBER 22, 1994.
(2) ANNUALIZED.
Page 157 of 159
<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 28, 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:
P.O. Box 8421
Boston, MA 02266-8421
BY INTERNET: www.armadafunds.com
Page 158 of 159
<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 159 of 159
<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
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 137
<PAGE>
INVESTMENT ADVISER
NATIONAL CITY INVESTMENT MANAGEMENT COMPANY
INVESTMENT SUB-ADVISER
NATIONAL ASSET MANAGEMENT CORPORATION
(ARMADA CORE EQUITY FUND AND
ARMADA TOTAL RETURN ADVANTAGE FUND)
Page 2 of 137
<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:
<TABLE>
<CAPTION>
PAGE
<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
Page 3 of 137
<PAGE>
PURCHASING, SELLING AND EXCHANGING FUND SHARES.........................XXX
DIVIDENDS, DISTRIBUTIONS AND TAXES.....................................XXX
FINANCIAL HIGHLIGHTS...................................................XXX
</TABLE>
Page 4 of 137
<PAGE>
RISK/RETURN SUMMARY
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.
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.
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
primarily 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.
Fund performance is measured against 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.
Page 5 of 137
<PAGE>
ARMADA INTERNATIONAL EQUITY FUND
FUND SUMMARY
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Equity securities of foreign issuers
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 of foreign
issuers. Equity securities of foreign issuers include common, preferred and
convertible bonds, of companies headquartered outside the United States. 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, Australasia, Far East (World EAFE) Index. The
Adviser makes judgements about the attractiveness of countries based upon a
collection of criteria. The relative valuation, growth prospects, fiscal,
monetary and regulatory government policies are considered jointly and generally
in making these judgements. The percentage of the Fund in each country is
determined by its relative attractiveness and weight in the World EAFE Index.
More than 25% of the Fund's assets may be invested in the securities of issuers
located in the same country. Within foreign markets, the Adviser buys and sells
securities based on its analysis of competitive position and valuation. The
adviser sells securities whose competitive position is deteriorating or whose
valuation is unattractive relative to industry peers. Likewise, companies with
strong and durable competitive advantages and attractive valuation are
considered for purchase.
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, and will lower Fund performance.
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.
Page 6 of 137
<PAGE>
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.
Companies making up the EAFE Index are generally issuers of larger cap
securities of multi-national companies who are affected by risks worldwide.
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 different countries.
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. For additional information about risks, see "More Information
About Risk."
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.
<TABLE>
<S> <C> <C>
1998 19.98%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C> <C>
20.11% -15.57%
(12/31/98) (9/30/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 4.87%.
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 19.98% 7.99%(1)
MORGAN STANLEY EAFE INDEX(3) 20.00% 12.35%(2)
</TABLE>
(1)Since August 1, 1997
(2)Since August 31, 1997
(3)The Morgan Stanley Capital International Europe, Australasia and Far East
(EAFE) Index represents the performance of the major stock markets in those
regions.
Page 7 of 137
<PAGE>
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 MAXIMUM 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 1.15%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.23%
-----
Total Annual Fund Operating Expenses 1.48%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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:
<TABLE>
<S> <C>
Armada International Equity Fund-- Class I Shares 1.42%
</TABLE>
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>
$151 $468 $808 $1,768
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 8 of 137
<PAGE>
ARMADA SMALL CAP VALUE FUND
FUND SUMMARY
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Small cap equity securities
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 small capitalization companies. The Fund may invest up to 20%
of its total assets at the time of purchase in foreign equity securities. In
buying and selling securities for the Fund, the Adviser uses a value-oriented
approach. The Adviser generally 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 generally sells securities based upon
price/earnings, price/book and price/cash flow ratios which rise above market
averages or when a company no longer has a small capitalization.
The Fund considers a small capitalization or "small cap" company to be one that
has a comparable market capitalization to the companies in the Russell 2000
Value Index.
Due to its investment strategy, the Fund may buy and sell securities frequently.
This may increase transaction costs and capital gains tax liabilities, and will
lower Fund performance.
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.
Smaller capitalization companies may be more vulnerable to adverse business or
economic events than larger, more established companies. In particular, these
companies may have limited
Page 9 of 137
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
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.
<TABLE>
<CAPTION>
<S> <C> <C>
1995 18.63%
1996 22.64%
1997 32.43%
1998 -6.96%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C> <C>
17.79% -17.57%
(12/31/98) (9/30/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 6.56%.
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 -6.96% 15.91%(1)
RUSSELL 2000 VALUE INDEX(3) -2.55% 14.84%(2)
</TABLE>
(1)Since December 20, 1989
(2)Since December 31, 1989
(3)The Russell 2000 Value Index is comprised of securities in The Russell 2000
Index with a less than average growth orientation. Companies in this index
generally have low price to book and price-earnings ratios.
Page 10 of 137
<PAGE>
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 MAXIMUM 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 1.00%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.15%
-----
Total Annual Fund Operating Expenses 1.25%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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:
<TABLE>
<S> <C>
Armada Small Cap Value Fund - Class I Shares 1.19%
</TABLE>
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>
$127 $397 $686 $1,511
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 11 of 137
<PAGE>
ARMADA SMALL CAP GROWTH FUND
FUND SUMMARY
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Small cap equity securities
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
PRINCIPAL INVESTMENT STRATEGY Investing in growth-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
PRINCIPAL INVESTMENT STRATEGIES 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. The Adviser seeks to invest in small capitalization companies with
strong growth in revenue, earnings, and cash flow. Purchase decision are also
based on the security's valuation relative to the company's expected growth
rate, earnings quality and competitive position, valuation compared to similar
securities, and the security's trading liquidity. Reasons for selling securities
include disappointing fundamentals, negative industry developments, evidence of
management's inability to execute a sound business plan, capitalization
exceeding the Adviser's definition of "small capitalization", desire to reduce
exposure to an industry or sector, and valuation levels which cannot be
justified by the company's fundamental growth prospects.
The Fund considers a small capitalization or "small cap" company to be one that
has a comparable market capitalization to 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, and will lower Fund performance.
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
Page 12 of 137
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
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.
<TABLE>
<S> <C>
1998 7.56%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
22.73% -21.14%
(12/31/98) (9/30/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -2.20%.
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 7.56% 10.59%(1)
RUSSELL 2000 GROWTH INDEX(3) -2.55% 0.81%(2)
</TABLE>
(1)Since August 1, 1997
(2)Since August 31, 1997
(3)The Russell 2000 Growth Index is comprised of securities in the Russell 2000
Stock Index with a greater than average growth orientation.
Page 13 of 137
<PAGE>
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 MAXIMUM 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 1.00%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.17%
-----
Total Annual Fund Operating Expenses 1.27%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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:
<TABLE>
<S> <C>
Armada Small Cap Growth Fund-- Class I Shares 1.21%
</TABLE>
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>
$129 $403 $697 $1,534
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 14 of 137
<PAGE>
ARMADA EQUITY GROWTH FUND
FUND SUMMARY
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Large cap equity securities
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 to the companies in the S&P 500 Composite
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, and will lower Fund performance.
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
Page 15 of 137
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
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.
<TABLE>
<S> <C>
1990 1.28%
1991 36.12%
1992 6.38%
1993 -0.27%
1994 -0.79%
1995 28.93%
1996 20.33%
1997 36.61%
1998 29.09%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
22.87% -13.71%
(12/31/98) (9/30/90)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 8.92%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE S&P 500 COMPOSITE INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ARMADA EQUITY GROWTH FUND 29.09% 22.11% 16.95%(1)
S&P 500 COMPOSITE INDEX(3) 28.60% 24.05% 17.89%(2)
</TABLE>
(1)Since December 20, 1989
(2)Since December 31, 1989
(3)The S&P 500 Composite Index is a widely recognized, unmanaged index of
common stocks generally representative of the U.S. stock market as a whole.
Page 16 of 137
<PAGE>
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 MAXIMUM 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 0.75%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.13%
-----
Total Annual Fund Operating Expenses 0.98%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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:
<TABLE>
<S> <C>
Armada Equity Growth Fund-- Class I Shares 0.92%
</TABLE>
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>
$100 $312 $542 $1,201
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 17 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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. Equity securities of foreign issuers include common, preferred and
convertible bonds, of companies headquartered outside the United States. 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. 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. The Fund may redeem in-kind redemptions consistent with its investment
objective. An in-kind redemption may serve to minimize any tax impact on the
remaining shareholders, because a Fund generally recognizes no taxable gain (or
loss) on the securities used to make an in-kind redemption. 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
Page 18 of 137
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
PERFORMANCE INFORMATION
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<S> <C>
1989 29.63%
1990 -1.08%
1991 34.07%
1992 6.89%
1993 1.20%
1994 -1.85%
1995 29.51%
1996 20.64%
1997 39.06%
1998 36.84%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
22.87% -14.38%
(12/31/98) (9/30/90)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 7.60%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE S&P 500 COMPOSITE INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARMADA TAX MANAGED EQUITY FUND 36.84% 23.89% 18.43% 18.08%(1)
S&P 500 COMPOSITE INDEX(2) 28.60% 24.05% 19.19% 18.97%(1)
</TABLE>
(1)Since June 30, 1984
(2)The S&P 500 Composite Index is a widely recognized, unmanaged index of
common stocks generally representative of the U.S. stock market as a whole.
Page 19 of 137
<PAGE>
The performance of the Armada Tax Managed Equity Fund for the period prior to
April 9, 1998 is represented by the performance of a common trust fund ("common
trust fund") which operated prior to the effectiveness of the registration
statement of the Tax Managed Equity Fund. At the time of the Tax Managed Equity
Fund's inception, the common trust fund was operated using materially equivalent
investment objectives, policies, guidelines and restrictions as the Fund. In
connection with the Tax Managed Equity Fund's commencement of operations, on
April 9 1998, the common trust fund transferred its assets to the Fund. At the
time of the transfer, the Adviser did not manage any other collective investment
or common trust funds using materially equivalent investment objectives,
policies, guidelines and restrictions to those of the Tax Managed Equity Fund.
The common trust fund was not open to the public generally, nor registered under
the Investment Company Act of 1940 (the "1940 Act") or subject to certain
restrictions that are imposed by the 1940 Act and the Internal Revenue Code. If
the common trust fund had been registered under the 1940 Act, performance may
have been adversely affected. Performance quotations of the common trust fund
represent past performance of the Adviser managed common trust fund, which are
separate and distinct from the Tax Managed Equity Fund; do not represent past
performance of the Fund; and should not be considered as representative of
future results of the Fund.
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 MAXIMUM 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 0.75%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.15%
-----
Total Annual Fund Operating Expenses 1.00%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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:
<TABLE>
<S> <C>
Armada Tax Managed Equity Fund-- Class I Shares 0.94%
</TABLE>
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team" and "Distribution of Fund Shares."
Page 20 of 137
<PAGE>
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>
$102 $318 $552 $1,225
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 21 of 137
<PAGE>
ARMADA CORE EQUITY FUND
FUND SUMMARY
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Large cap common stocks
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 stock market
capitalizations. The Sub-Adviser will normally invest between 20% and 50% of its
assets in the following three types of equity securities: (1) common stocks that
meet the Sub-Adviser's criteria for five-year annual earnings-per-share growth
rates and which exhibit no decline in the normalized annual earnings-per-share
rate during the last five years; (2) common stocks with price-to-earnings ratios
below the average of the companies included in the S&P 500 Composite Index; and
(3) common stocks that pay dividends at a rate above the average of the
companies included in the S&P 500 Composite Index.
The Sub-Adviser utilizes a systematic, disciplined investment process when
selecting individual securities. This includes: (1) screening a database for
liquidity and the criteria listed above; (2) scoring each issue emphasizing
fundamental, valuation and technical indicators; and (3) security analysis that
further evaluates the company and the stock, which includes an analysis of
company fundamentals such as earnings, profitability and management, valuation
such as price/earnings, price/book and yield, and technical analysis emphasizing
individual stock price trends.
The sell discipline involves the monitoring of each company's fundamental,
valuation, and technical measures. If one of these measures is unfavorable, an
immediate review of that company is performed. If two of these three measures
are unfavorable, that stock is sold. The Fund may invest up to 20% of its total
assets at the time of purchase in foreign securities.
The Fund considers a large capitalization or "large cap" company to be one that
has a comparable market capitalization to 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, and will lower Fund performance.
Page 22 of 137
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
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.
<TABLE>
<CAPTION>
1998 32.37%
<S> <C>
BEST QUARTER WORST QUARTER
25.10% -6.78%
(12/31/98) (9/30/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 12.91%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE S&P 500 COMPOSITE INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ARMADA CORE EQUITY FUND 32.37% 24.26%(1)
S&P 500 COMPOSITE INDEX(3) 28.60% 28.38%(2)
</TABLE>
(1) Since August 1, 1997
(2) Since August 31, 1997
(3) The S&P 500 Composite Index is a widely recognized, unmanaged index of
common stocks generally representative of the U.S. stock market as a whole.
Page 23 of 137
<PAGE>
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 maximum 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 0.75%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.12%
-----
Total Annual Fund Operating Expenses 0.97%*
- --------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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 0.91%
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>
$99 $309 $536 $1,190
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 24 of 137
<PAGE>
ARMADA EQUITY INDEX FUND
FUND SUMMARY
INVESTMENT GOAL To approximate, before Fund
expenses, the investment results of
the S&P 500 Composite Index
INVESTMENT FOCUS Common stocks of larger issuers
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
PRINCIPAL INVESTMENT STRATEGY Investing in stocks that comprise
the S&P 500 Composite Index
INVESTOR PROFILE Investors seeking returns similar to
the S&P 500 Composite Index, who are
willing to accept the risk of
investing in equity securities
PRINCIPAL INVESTMENT STRATEGIES 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 Composite Index by
investing in securities comprising the S&P 500 Composite Index. The investment
objective may be changed without a shareholder vote. The S&P 500 Composite Index
is made up of common stocks of 500 large, publicly traded companies. The Fund
buys and holds all stocks included in the S&P 500 Composite Index in exactly the
same proportion as those stocks are held in the Index. Stocks are eliminated
from the Fund when removed from the S&P 500 Composite Index. 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, and will lower Fund performance.
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
Composite Index of common stocks, may underperform other equity market segments
or the equity market as a whole.
Page 25 of 137
<PAGE>
The Fund's ability to duplicate the performance of the S&P 500 Composite 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. For additional
information about risks, see "More Information About Risk."
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 MAXIMUM 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 0.35%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.16%
-----
Total Annual Fund Operating Expenses 0.61%*
- --------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.36%
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>
$62 $195 $340 $762
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 26 of 137
<PAGE>
ARMADA EQUITY INCOME FUND
FUND SUMMARY
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Income producing equity securities
SHARE PRICE VOLATILITY Medium
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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. Equity
securities include public and privately issued equity securities, common and
preferred stocks, warrants, rights to subscribe to common stock and convertible
securities, as well as instruments that attempt to track the price movement of
equity indices. 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 dividends with a yield above the S&P 500 Composite
Index. The Fund may invest up to 20% of its total assets at the time of purchase
in foreign equity 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, and will lower Fund performance.
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
Page 27 of 137
<PAGE>
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. For additional information about risks, see "More Information
About Risk."
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.
<TABLE>
<CAPTION>
<S> <C>
1995 27.70%
1996 18.08%
1997 29.21%
1998 10.23%
BEST QUARTER WORST QUARTER
12.63% -8.77%
(6/30/97) (9/30/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 10.58%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE S&P 500 BARRA/VALUE INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ARMADA EQUITY INCOME FUND 10.23% 18.69%(1)
S&P 500 BARRA/VALUE INDEX(3) 14.68% 22.52%(2)
</TABLE>
(1) Since July 1, 1994
(2) Since July 31, 1994
(3) The S&P Barra/Value Index is comprised of securities in the S&P 500
Composite Index that have a lower than average price-to book ratio.
Page 28 of 137
<PAGE>
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 MAXIMUM 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 0.75%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.14%
-----
Total Annual Fund Operating Expenses 0.99%*
- --------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor are
each waiving a portion of the fees in order to keep total operating expenses at
a specified level. The Distributor 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 0.93%
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>
$101 $315 $547 $1,213
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 29 of 137
<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, fixed income
securities and cash equivalents
SHARE PRICE VOLATILITY Medium
(RELATIVE TO MUTUAL FUNDS GENERALLY)
PRINCIPAL INVESTMENT STRATEGY Investing in a diversified portfolio
of growth-oriented common stocks,
investment grade fixed income
securities and cash equivalents with
varying asset allocations depending
on the Adviser's assessment of
market conditions
INVESTOR PROFILE Investors seeking a broad
diversification by asset class and
style to manage risk and provide the
potential for above-average total
returns (as gauged by the returns of
the S&P 500 Composite Index and the
Lehman Aggregate Bond Index)
PRINCIPAL INVESTMENT STRATEGIES 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 (which include common, preferred and convertible
bonds of companies head-quartered outside the United States). The Fund may
invest up to 20% of its total assets at the time of purchase in foreign
securities (which include common, preferred and convertible bonds of companies
headquartered outside the United States). The Fund also invests in small
capitalization companies. 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) for current income.
The Fund invests in cash equivalent, short-term obligations for stability and
liquidity.
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, and will lower Fund performance.
Page 30 of 137
<PAGE>
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
Page 31 of 137
<PAGE>
segments or the fixed income or equity markets as a whole. For additional
information about risks, see "More Information About Risk."
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 MAXIMUM 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 0.75%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.21%
-----
Total Annual Fund Operating Expenses 1.06%*
- --------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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 1.00%
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>
$108 $337 $585 $1,294
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 32 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 U.S. government issuers. Fixed
income securities are designed to provide a fixed rate of interest at maturity
and return the principal value at the end of the term. 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. If a security is downgraded, the Adviser will re-evaluate whether
continuing to hold the security is in the best interest of shareholders. 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,
sometimes known as "junk bonds".
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, and will lower Fund performance.
Page 33 of 137
<PAGE>
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.
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.
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the Portfolio (such as an asset-backed
security) later than expected. This may happen during a period of rising
interest rates. Under these circumstances, the value of the obligation will
decrease and the Portfolio will suffer from the inability to invest in higher
yielding 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 full faith and credit of the United States,
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. Examples of agencies and
instrumentalitites of the U.S. government include GNMA and TV Authority.
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. For additional information about risks, see
"More Information About Risk."
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.
Page 34 of 137
<PAGE>
This bar chart shows changes in the performance of the Fund's Class I Shares
from year to year.
<TABLE>
<CAPTION>
<S> <C>
1995 19.18%
1996 3.11%
1997 8.91%
1998 9.05%
BEST QUARTER WORST QUARTER
6.92% -2.52%
(6/30/95) (3/31/96)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -2.69%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ARMADA TOTAL RETURN ADVANTAGE FUND 9.05% 8.95%(1)
LEHMAN GOVERNMENT/CORPORATE BOND INDEX(3) 9.47% 8.91%(2)
</TABLE>
(1) Since July 7, 1994
(2) Since July 31, 1994
(3) The Lehman Government/Corporate Bond Index is a widely recognized index of
government and corporate debt securities rated investment grade or better, with
maturities of at least 1 year.
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 MAXIMUM 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 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.14%
-----
Total Annual Fund Operating Expenses 0.79%*
- --------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.49%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
Page 35 of 137
<PAGE>
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>
$81 $252 $439 $978
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 36 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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. If a security is
downgraded, the Adviser will re-evaluate the holding to determine whether it is
in the best interest of investors to sell. 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 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, and will lower Fund performance.
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.
Page 37 of 137
<PAGE>
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.
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the Portfolio (such as an asset-backed
security) later than expected. This may happen during a period of rising
interest rates. Under these circumstances, the value of the obligation will
decrease and the Portfolio will suffer from the inability to invest in higher
yielding 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. For additional information about risks, see
"More Information About Risk."
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.
<TABLE>
<CAPTION>
<S> <C>
1995 14.46%
1996 3.48%
1997 7.97%
1998 8.44%
BEST QUARTER WORST QUARTER
4.75% -0.98%
(9/30/98) (3/31/96)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -2.17%.
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 8.44% 7.57%(1)
LEHMAN AGGREGATE BOND INDEX(3) 8.67% 8.90%(2)
</TABLE>
(1)Since August 10, 1994
(2)Since August 31, 1994
(3)The Lehman Aggregate Bond Index is an unmanaged, fixed income, market
value-weighted index that includes treasury issues, agency issues, corporate
bond issues and mortgage-backed securities.
Page 38 of 137
<PAGE>
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 MAXIMUM 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 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.14%
-----
Total Annual Fund Operating Expenses 0.79%*
</TABLE>
* The Fund's total actual annual operating expenses for the most recent fiscal
year were less than the amount shown above because the Distributor is waiving a
portion of the fees in order to keep total operating expenses at a specified
level. The Distributor 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 0.73%
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>
$81 $252 $439 $978
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 39 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
PRINCIPAL INVESTMENT STRATEGY Investing in investment grade
fixed income securities, while
maintaining a dollar-weighted
average maturity between three and
ten years
INVESTOR PROFILE Investors seeking current income,
and who are willing to accept the
risks of investing in fixed income
securities
PRINCIPAL INVESTMENT STRATEGIES 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. 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 maturity of between Three 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.
Page 40 of 137
<PAGE>
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the Portfolio (such as an asset-backed
security) later than expected. This may happen during a period of rising
interest rates. Under these circumstances, the value of the obligation will
decrease and the Portfolio will suffer from the inability to invest in higher
yielding 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. For additional information about risks, see
"More Information About Risk."
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.
<TABLE>
<CAPTION>
<S> <C>
1990 8.28%
1991 15.69%
1992 7.51%
1993 10.32%
1994 -4.52%
1995 15.74%
1996 3.12%
1997 6.94%
1998 7.91%
BEST QUARTER WORST QUARTER
5.46% -3.22%
(12/31/90) (3/31/94)
</TABLE>
Page 41 of 137
<PAGE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -1.05%.
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 5 YEARS SINCE INCEPTION
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ARMADA INTERMEDIATE BOND FUND 7.91% 5.63% 7.71%(1)
LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX(3) 8.42% 6.59% 8.05%(2)
</TABLE>
(1)Since December 20, 1989
(2)Since December 31, 1989
(3)The Lehman Intermediate Government/Corporate Bond Index is representative of
intermediate-term bonds.
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 MAXIMUM 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 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.15%
-----
Total Annual Fund Operating Expenses 0.80%*
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.59%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
Page 42 of 137
<PAGE>
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>
$82 $255 $444 $990
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 43 of 137
<PAGE>
ARMADA GNMA FUND
FUND SUMMARY
INVESTMENT GOAL Current income as well as preservation
of capital
INVESTMENT FOCUS Mortgage-backed securities
SHARE PRICE VOLATILITY Low
(RELATIVE TO MUTUAL FUNDS GENERALLY)
PRINCIPAL INVESTMENT STRATEGY Investing in mortgage-backed
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
PRINCIPAL INVESTMENT STRATEGIES 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-backed 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-backed 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 such as Treasuries,
agencies, asset-backed securities and commercial paper.
In buying and selling securities for the Fund, the Adviser assesses current and
projected market conditions by considering a number of factors, including yield
to maturity, maturity, quality and the outlook for particular issuers and market
sectors.
The Fund's dollar-weighted average portfolio maturity will be between three 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, and will lower Fund performance.
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.
Page 44 of 137
<PAGE>
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.
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the Portfolio (such as an asset-backed
security) later than expected. This may happen during a period of rising
interest rates. Under these circumstances, the value of the obligation will
decrease and the Portfolio will suffer from the inability to invest in higher
yielding securities.
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. For additional information about risks, see "More
Information About 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.
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. For additional information about risks, see "More
Information About Risk."
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.
<TABLE>
<S> <C>
1995 16.15%
1996 4.75%
1997 9.31%
1998 6.50%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
5.15% -0.42%
(3/31/95) (3/31/96)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -0.14%.
Page 45 of 137
<PAGE>
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 6.50% 8.22%(1)
LEHMAN GNMA INDEX(3) 6.91% 8.70%(2)
</TABLE>
(1)Since August 10, 1994
(2)Since August 31, 1994
(3)The Lehman GNMA Index tracks GNMA issues, including single family, mobile
home, midgets and graduated payment components.
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 MAXIMUM FEES
AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I SHARES
- --------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.18%
-----
Total Annual Fund Operating Expenses 0.83%*
- --------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Distributor is
waiving a portion of the fees in order to keep total operating expenses at a
specified level. The Distributor 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 0.77%
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> <C>
$85 $265 $460 $1,025
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 46 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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,
including obligations of corporate and government issuers, 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. 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, and will lower Fund performance.
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.
Page 47 of 137
<PAGE>
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.
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the Portfolio (such as an asset-backed
security) later than expected. This may happen during a period of rising
interest rates. Under these circumstances, the value of the obligation will
decrease and the Portfolio will suffer from the inability to invest in higher
yielding 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. For additional information about risks, see
"More Information About Risk."
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.
<TABLE>
<S> <C>
1995 7.69%
1996 5.29%
1997 6.43%
1998 6.58%
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
2.95% 0.65%
(9/30/98) (3/31/97)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 1.16%.
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 6.58% 6.23%(1)
MERRILL LYNCH 1-3 YEAR GOVERNMENT/CORPORATE INDEX (3) 6.98% 6.74%(2)
</TABLE>
(1)Since July 7, 1994
(2)Since July 31, 1994
(3)This is a market capitalization weighted index including U.S. Treasury and
Agency bonds and U.S. fixed coupon investment grade corporate bonds (U.S.
domestic and Yankee/global bonds). U.S. Treasury bonds must have at least $1
billion face value outstanding and agency and corporate bonds must have at
least $150 million face value outstanding to be included in the index. Both
total return and price returns are calculated daily. Prices are taken as of
approximately 3 p.m. ET. Quality range is BBB3-AAA based on composite Moody
and S&P ratings. Maturities for all bonds are greater than or equal to one
year and less than three years. Floaters, Equipment Trust Certificates, and
Title 11 securites are excluded.
Page 48 of 137
<PAGE>
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 MAXIMUM FEES
AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I SHARES
- ------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.45%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.18%
-----
Total Annual Fund Operating Expenses 0.73%*
- --------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.53%
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>
$75 $233 $406 $906
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 49 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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. The Fund
normally invests at least 80% 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). However, some Fund dividends
will be taxable, such as dividends that are derived from occasional taxable
investments and distributions of short and long-term capital gains. Also, Fund
dividends will generally be subject to state and local income taxes for any
shareholders who are not Ohio residents. 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 primarily 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. If a security is
downgraded, the Adviser will re-evaluate whether continuing to hold the
security is in the best interest of shareholders. The Fund ordinarily will
maintain an average weighted portfolio maturity of between three 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,
and will lower Fund performance.
Page 50 of 137
<PAGE>
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.
The Fund's focus 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 than a
diversified fund 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. For additional
information about risks, see "More Information About Risk."
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.
<TABLE>
<S> <C>
1991 8.59%
1992 6.73%
1993 10.14%
1994 -4.27%
1995 13.44%
1996 3.93%
1997 7.24%
1998 5.44%
</TABLE>
Page 51 of 137
<PAGE>
<TABLE>
<CAPTION>
BEST QUARTER WORST QUARTER
<S> <C>
5.13% -4.88%
(3/31/95) (3/31/94)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -1.22%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN 7 YEAR MUNICIPAL BOND INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ARMADA OHIO TAX EXEMPT BOND FUND 5.44% 5.00% 6.07%(1)
LEHMAN 7 YEAR MUNICIPAL BOND INDEX(3) 6.23% 5.80% 7.45%(2)
</TABLE>
(1)Since January 5, 1990
(2)Since January 31, 1990
(3)The Lehman 7 Year Municipal Bond Index is a broad based total return index.
The bonds are all investment grade, fixed rate with maturities of 7-8 years and
are selected from issues larger than $50 million dated since January 1984.
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 MAXIMUM FEES
AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.15%
-----
Total Annual Fund Operating Expenses* 0.80%
- --------------------------------------------------------------------------------
</TABLE>
* The Fund's total actual annual operating expenses for the most recent
fiscal year (restated to reflect advisory fee waivers to take effect on October
1, 1999) were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.59%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
Page 52 of 137
<PAGE>
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>
$82 $255 $444 $990
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 53 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 normally invests at least 80% of its net assets 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). However, some Fund dividends will be taxable, such as
dividends that are derived from occasional taxable investments and distributions
of short and long-term capital gains. Also, Fund dividends will generally be
subject to state and local income taxes for any shareholders who are not
Pennsylvania residents. 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 primarily 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. If a security is
downgraded, the Adviser will re-evaluate whether continuing to hold the security
is in the best interest of shareholders. The Fund ordinarily will maintain an
average weighted portfolio maturity of between three 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,
and will lower Fund performance.
Page 54 of 137
<PAGE>
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 focus 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. For additional information about risks, see
"More Information About Risk."
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.
<TABLE>
<CAPTION>
<S><C> <C>
1995 9.93%
1996 3.91%
1997 6.94%
1998 5.62%
</TABLE>
Page 55 of 137
<PAGE>
<TABLE>
<CAPTION>
<S><C> <C>
BEST QUARTER WORST QUARTER
3.80% -0.32%
(3/31/95) (3/31/96)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -1.19%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN 7 YEAR MUNICIPAL BOND INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND 5.62% 5.81%(1)
LEHMAN 7 YEAR MUNICIPAL BOND INDEX(3) 6.23% 6.94%(2)
</TABLE>
(1)Since August 10, 1994
(2)Since August 31, 1994
(3)The Lehman 7 Year Municipal Bond Index is a broad based total return index.
The bonds are all investment grade, fixed rate with maturities of 7-8 years and
are selected from issues larger than $50 million dated since January 1984.
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 MAXIMUM FEES
AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.15%
-----
Total Annual Fund Operating Expenses* 0.80%
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year (restated to reflect advisory fee waivers to take effect on October
1, 1999) were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.59%
For more information about these fees, see "Investment Adviser, Sub-Adviser and
Investment Team," and "Distribution of Fund Shares."
Page 56 of 137
<PAGE>
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>
<S><C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$82 $255 $444 $990
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 57 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 normally invests at least 80% of its total assets in debt securities
that generate income exempt from federal income tax. However, Fund dividends
will generally be taxable for state and local income tax purposes. Also, some
Fund dividends will be taxable for federal income tax purposes, such as those
derived from occasional taxable investments and distributions of short and
long-term capital gains. 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 primarily 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 three 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,
and will lower Fund performance.
Page 58 of 137
<PAGE>
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. For additional information about risks, see "More
Information About Risk."
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.
<TABLE>
<CAPTION>
<S><C> <C>
1989 9.79%
1990 4.65%
1991 8.45%
1992 9.74%
1993 11.76%
1994 -4.58%
1995 14.05%
1996 -1.07%
1997 6.57%
1998 5.95%
</TABLE>
Page 59 of 137
<PAGE>
<TABLE>
<CAPTION>
<S><C> <C>
BEST QUARTER WORST QUARTER
5.44% -4.13%
(3/31/95) (3/31/94)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was -1.25%.
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
ENDED DECEMBER 31, 1998 TO THOSE OF THE LEHMAN 10 YEAR MUNICIPAL BOND INDEX.
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARMADA NATIONAL TAX EXEMPT BOND FUND 5.95% 3.98% 6.39% 7.24%(1)
LEHMAN 10 YEAR MUNICIPAL BOND INDEX(3) 6.76% 6.35% 8.32% ___%(2)
</TABLE>
(1)Since July 31, 1984
(2)Since July 31, 1984
(3)The Lehman 10 Year Municipal Bond Index is a broad based total return index.
The bonds are all investment grade, fixed rate with maturities of 9-12 years and
are selected from issues larger than $50 million dated since January 1984.
The performance of the Armada National Tax Exempt Bond Fund for the period prior
to April 19, 1998 is represented by the performance of a common trust fund
("common trust fund") which operated prior to the effectiveness of the
registration statement of the National Tax Exempt Bond Fund. At the time of the
National Tax Exempt Bond Fund's inception, the common trust fund was operated
using materially equivalent investment objectives, policies, guidelines and
restrictions as the Fund. In connection with the National Tax Exempt Bond Fund's
commencement of operations, on April 19, 1998, the common trust fund transferred
its assets to the Fund. At the time of the transfer, the Adviser did not manage
any other collective investment or common trust funds using materially
equivalent investment objectives, policies, guidelines and restrictions to those
of the National Tax Exempt Bond Fund.
The common trust fund was not open to the public generally, nor registered under
the Investment Company Act of 1940 (the "1940 Act") or subject to certain
restrictions that are imposed by the 1940 Act and the Internal Revenue Code. If
the common trust fund had been registered under the 1940 Act, performance may
have been adversely affected. Performance quotations of the common trust fund
represent past performance of the Adviser managed common trust fund, which are
separate and distinct form the National Tax Exempt Bond Fund; do not represent
past performance of the Fund; and should not be considered as representative of
future results of the Fund.
Page 60 of 137
<PAGE>
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 MAXIMUM FEES
AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I SHARES
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.15%
-----
Total Annual Fund Operating Expenses* 0.80%
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year (restated to reflect advisory fee waivers to take effect on October
1, 1999) were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.59%
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>
<S><C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$82 $255 $444 $990
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 61 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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). However, some Fund
dividends may be taxable if the Fund, as it is permitted to do, invests some of
its assets in taxable instruments. Also, Fund dividends will generally be
subject to state and local income taxes for any shareholders who are not Ohio
residents. 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.
Page 62 of 137
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
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 MAXIMUM FEES
AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
Page 63 of 137
<PAGE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I SHARES
- --------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.35%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.17%
-----
Total Annual Fund Operating Expenses 0.62%*
</TABLE>
- --------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.36%
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>
<S><C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
$63 $199 $346 $774
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 64 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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). However, some Fund dividends may be taxable if the Fund, as
it is permitted to do, invests some of its assets in taxable instruments. Also,
Fund dividends will generally be subject to state and local income taxes for any
shareholders who are not Pennsylvania residents. 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 preference 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.
Page 65 of 137
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
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.
<TABLE>
<S> <C>
1995 3.50%
1996 3.14%
1997 3.43%
1998 3.14%
BEST QUARTER WORST QUARTER
0.92% 0.72%
(6/30/95) (9/30/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 1.39%.
Page 66 of 137
<PAGE>
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 3.14% 3.27%(1)
</TABLE>
(1)Since August 10, 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 MAXIMUM 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 0.40%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.16%
-----
Total Annual Fund Operating Expenses 0.66%*
</TABLE>
- -------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.35%
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>
$67 $211 $368 $822
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 67 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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).
However, Fund dividends will generally be taxable for state and local income tax
purposes. Also, some Fund dividends may be taxable for federal income tax
purposes if the Fund, as it is permitted to do, invests some of its assets in
taxable 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.
Page 68 of 137
<PAGE>
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. For additional information about risks, see
"More Information About Risk."
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.
<TABLE>
<S> <C>
1989 6.20%
1990 5.83%
1991 4.26%
1992 2.52%
1993 2.02%
1994 2.51%
1995 3.57%
1996 3.21%
1997 3.37%
1998 3.23%
BEST QUARTER WORST QUARTER
1.47% 0.47%
(12/31/90) (3/31/94)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 1.38%.
Page 69 of 137
<PAGE>
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 3.23% 3.18% 3.66% 3.75%(1)
</TABLE>
(1)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 MAXIMUM 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 0.35%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.12%
-----
Total Annual Fund Operating Expenses 0.57%*
</TABLE>
- -------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.31%
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>
$58 $183 $318 $714
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 70 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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. Foreign government obligations are U.S.
dollar-denominated obligations (limited to commercial paper and other notes)
issued or guaranteed by a foreign government or other entity located or
organized in a foreign country that maintains a short-term foreign currency
rating in the highest short-term ratings category by the requisite number of
Nationally Recognized Statistical Rating Organizations (NRSROs). 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 actively buys throughout the
money market, laddering maturities to meet or exceed shareholder liquidity needs
while seeking the highest possible yield consistent with the Fund's risk
profile.
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.
Page 71 of 137
<PAGE>
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. For additional information about risks, see "More
Information About Risk."
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.
<TABLE>
<S> <C>
1989 9.20%
1990 8.16%
1991 5.67%
1992 3.33%
1993 2.76%
1994 3.98%
1995 5.72%
1996 5.19%
1997 5.32%
1998 5.25%
BEST QUARTER WORST QUARTER
2.01% 0.67%
(6/30/90) (6/30/93)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 2.29%.
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 5.25% 5.09% 5.44% 5.68%(1)
</TABLE>
(1)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 MAXIMUM FEES
AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
Page 72 of 137
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- -----------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.35%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.10%
-----
Total Annual Fund Operating Expenses 0.55%*
</TABLE>
- ------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.39%
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>
$56 $176 $307 $689
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 73 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 actively buys throughout the money market,
laddering maturities to meet or exceed shareholder liquidity needs while seeking
the highest possible yield consistent with the Fund's risk profile.
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
Page 74 of 137
<PAGE>
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.
For additional information about risks, see "More Information About Risk."
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.
<TABLE>
<S> <C>
1989 9.01%
1990 7.94%
1991 5.65%
1992 3.36%
1993 2.75%
1994 3.91%
1995 5.63%
1996 5.14%
1997 5.25%
1998 5.15%
BEST QUARTER WORST QUARTER
1.95% 0.67%
(6/30/90) (6/30/93)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 2.25%.
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 5.15% 5.02% 5.36% 5.57%(1)
</TABLE>
(1)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 MAXIMUM FEES
AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
Page 75 of 137
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS I SHARES
- ------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.35%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.10%
-----
Total Annual Fund Operating Expenses 0.55%*
</TABLE>
- -------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.39%
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>
$56 $176 $307 $689
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 76 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 actively buys throughout the money market,
laddering maturities to meet or exceed shareholder liquidity needs while seeking
the highest possible yield consistent with the Fund's risk profile.
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. For additional information about risks, see "More
Information About Risk."
Page 77 of 137
<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.
<TABLE>
<S> <C>
1995 5.38%
1996 4.86%
1997 4.92%
1998 4.70%
BEST QUARTER WORST QUARTER
1.36% 1.04%
(6/30/95) (12/31/98)
</TABLE>
The Fund's performance from January 1, 1999 to June 30, 1999 was 2.07%.
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 4.70% 4.89%(1)
</TABLE>
(1)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 MAXIMUM 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 0.30%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses 0.13%
-----
Total Annual Fund Operating Expenses 0.53%*
</TABLE>
- -------------------------------------------------------------------------------
* The Fund's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Adviser and
Distributor are each waiving a portion of the fees in order to keep total
operating expenses at a specified level. The Adviser and Distributor 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 0.42%
Page 78 of 137
<PAGE>
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>
$54 $170 $296 $665
</TABLE>
EXPENSES HAVE BEEN RESTATED TO REFLECT CURRENT FEES.
Page 79 of 137
<PAGE>
ARMADA MID CAP GROWTH FUND
FUND SUMMARY
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Mid-cap equity securities
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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, and will lower Fund performance.
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
Page 80 of 137
<PAGE>
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. For additional information about risks, see "More Information About
Risk."
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 MAXIMUM 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 1.00%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses* 0.22%
-----
Total Annual Fund Operating Expenses 1.32%
</TABLE>
- -------------------------------------------------------------------------------
* "Other Expenses" are based on estimated amounts for the current fiscal year.
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
<S> <C>
$134 $418
</TABLE>
Page 81 of 137
<PAGE>
ARMADA LARGE CAP ULTRA FUND
FUND SUMMARY
INVESTMENT GOAL Capital appreciation
INVESTMENT FOCUS Large cap equity securities
SHARE PRICE VOLATILITY High
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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. For additional information about risks, see "More Information About
Risk."
Page 82 of 137
<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 MAXIMUM 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 0.75%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses* 0.18%
-----
Total Annual Fund Operating Expenses 1.03%
</TABLE>
- ------------------------------------------------------------------------------
* "Other Expenses" are based on estimated amounts for the current fiscal year.
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
<S> <C>
$105 $328
</TABLE>
Page 83 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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 normally invests 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 mortgage-related debt securities and preferred stock of
non-governmental issuers and the same proportion of its total assets in
non-governmental asset backed securities. 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 a dollar-weighted average maturity of
between three 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, and will lower Fund performance.
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. For additional information about risks, see "More
Information About Risk."
Page 84 of 137
<PAGE>
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.
Debt extension risk is the risk that an issuer will exercise its right to pay
principal on an obligation held by the Portfolio (such as an asset-backed
security) later than expected. This may happen during a period of rising
interest rates. Under these circumstances, the value of the obligation will
decrease and the Portfolio will suffer from the inability to invest in higher
yielding 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. For additional information about risks, see "More
Information About Risk."
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 MAXIMUM 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 0.55%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses* 0.18%
-----
Total Annual Fund Operating Expenses 0.83%
</TABLE>
- -------------------------------------------------------------------------------
* "Other Expenses" are based on estimated amounts for the current fiscal year.
Page 85 of 137
<PAGE>
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
<S> <C>
$85 $265
</TABLE>
Page 86 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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. The Fund will normally invest at least 80% of the value of its total
assets in Michigan municipal securities. However, some Fund dividends will be
taxable, such as dividends that are derived from occasional taxable investments
and distributions of short and long-term capital gains. Also, Fund dividends
will generally be subject to state and local income taxes for any shareholders
who are not Michigan residents. 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 three 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.
Page 87 of 137
<PAGE>
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, and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING IN THE ARMADA MICHIGAN 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. For additional information about risks, see "More
Information About 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's focus 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. For additional information about risks, see
"More Information About Risk."
PERFORMANCE INFORMATION
There is no bar chart or performance table for Class I Shares of the Fund
because it is not yet operating.
Page 88 of 137
<PAGE>
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 MAXIMUM FEES
AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.74%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses* 0.18%
-----
Total Annual Fund Operating Expenses 1.02%
- -----------------------------------------------------------------------------------
* "Other Expenses" are based on estimated amounts for the current fiscal year.
</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:
<TABLE>
<S> <C> <C>
1 YEAR 3 YEARS
$104 $325
</TABLE>
Page 89 of 137
<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
(RELATIVE TO MUTUAL FUNDS GENERALLY)
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
PRINCIPAL INVESTMENT STRATEGIES 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.
Page 90 of 137
<PAGE>
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. For additional information about risks, see "More
Information About Risk."
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 MAXIMUM FEES
AND EXPENSES THAT YOU MAY PAY INDIRECTLY IF YOU HOLD SHARES OF THE FUND.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
CLASS I SHARES
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.40%
Distribution and Service (12b-1) Fees 0.10%
Other Expenses* 0.16%
-----
Total Annual Fund Operating Expenses 0.66%
- ---------------------------------------------------------------------------------
* "Other Expenses" are based on estimated amounts for the current fiscal year.
</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
$67 $211
Page 91 of 137
<PAGE>
MORE INFORMATION ABOUT RISK
<TABLE>
<CAPTION>
<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 convertible Armada Small Cap Growth Fund
securities, as well as instruments that attempt to track the Armada Equity Growth Fund
price movement of equity indices. Investments in equity Armada Tax Managed Equity Fund
securities and equity derivatives in general are subject to Armada Core Equity Fund
market risks that may cause their prices to fluctuate over Armada Equity Index Fund
time. The value of securities convertible into equity Armada Equity Income Fund
securities, such as warrants or convertible debt, is also Armada Balanced Allocation Fund
affected by prevailing interest rates, the credit quality of Armada Total Return Advantage Fund
the issuer and any call provision. Fluctuations in the value Armada Enhanced Income Fund
of equity securities in which a mutual fund invests will Armada Mid Cap Growth Fund
cause a fund's net asset value to fluctuate. An investment Armada Large Cap Ultra Fund
in a portfolio of equity securities may be more suitable for
long-term investors who can bear the risk of these share
price fluctuations.
<CAPTION>
<S> <C>
CONVERTIBLE SECURITIES -- Convertible Armada Equity Growth Fund
securities have characteristics of both fixed Armada Equity Income Fund
income and equity securities. The value of the Armada Balanced Allocation Fund
convertible security tends to move with the Armada Mid Cap Growth Fund
market value of the underlying stock, but may Armada Large Cap Ultra Fund
also be affected by interest rates, credit quality
of the issuer and any call provisions.
<CAPTION>
<S> <C>
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, the Armada Bond Fund
values of outstanding fixed income securities generally Armada Intermediate Bond Fund
rise. Moreover, while securities with longer maturities tend Armada GNMA Fund
to produce higher yields, the prices of longer maturity Armada Enhanced Income Fund
securities are also subject to greater market fluctuations as Armada Ohio Tax Exempt Bond Fund
a result of changes in interest rates. In addition to these Armada Pennsylvania Municipal Bond Fund
fundamental risks, different types of fixed income securities Armada National Tax Exempt Bond Fund
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
Page 92 of 137
<PAGE>
<CAPTION>
<S> <C>
CALL RISK -- During periods of falling interest Armada Balanced Allocation Fund
rates, certain debt obligations with high Armada Total Return Advantage
interest Fund 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
<CAPTION>
<S> <C>
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
<CAPTION>
<S> <C>
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 93 of 137
<PAGE>
<CAPTION>
<S> <C>
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.
<CAPTION>
<S> <C>
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
ssuer's ability to levy and collect taxes.
Page 94 of 137
<PAGE>
In addition, the Fund's concentration of Armada Ohio Tax Exempt Bond Fund
investments in issuers located in a single Armada Pennsylvania Municipal Bond Fund
state makes the Fund more susceptible to Armada Ohio Municipal Money Market Fund
adverse political or economic developments Armada Pennsylvania Tax Exempt Money Market Fund
affecting that state. The Fund also may be Armada Money Market Fund
riskier than mutual funds that buy securities Armada Michigan Municipal Bond Fund
of issuers in numerous states.
<CAPTION>
<S> <C>
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 Armada Intermediate Bond Fund
loans. They are sensitive to changes in interest Armada GNMA Fund
rates, but may respond to these changes differently Armada Enhanced Income Fund
from other fixed income securities due to the Armada U.S. Government Income Fund
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.
<CAPTION>
<S> <C>
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 Armada Tax Managed Equity Fund
in foreign countries. Foreign securities markets generally Armada Core Equity Fund
have less trading volume and less liquidity than U.S. Armada Equity Income Fund
markets. In addition, the value of securities denominated Armada Balanced Allocation Fund
in foreign currencies, and of dividends from such Armada Total Return Advantage Fund
securities, can change significantly when foreign currencies Armada Intermediate Bond Fund
strengthen or weaken relative to the U.S. dollar. Foreign Armada Enhanced Income Fund
companies or governments generally are not subject to Armada Mid Cap Growth Fund
uniform accounting, auditing, and financial reporting Armada U.S. Government Income Fund
standards comparable to those applicable to domestic U.S.
Page 95 of 137
<PAGE>
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. Investment in sovereign debt obligations
by certain Funds involves risks not present in debt
obligations of corporate issuers. The issuer of the debt or
the governmental authorities that control the repayment of
the debt may be unable or unwilling to repay principal or
interest when due in accordance with the terms of such debt,
and a Fund may have limited recourse to compel payment in
the event of a default. Periods of economic uncertainty may
result in volatility of market prices of sovereign debt, and
in turn a Fund's NAV, to a greater extent than the
volatility inherent in debt obligations of U.S. issuers.
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:
<CAPTION>
<S> <C>
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 a Armada Enhanced Income Fund
specific security transaction or portfolio position. Armada Mid Cap Growth Fund
- - Only a limited market currently exists for hedging Armada U.S. Government Income Fund
transactions relating to currencies in certain
emerging markets.
Page 96 of 137
<PAGE>
<CAPTION>
<S> <C>
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 Armada Equity Index Fund
individual securities, fluctuations in markets, and Armada Equity Income Fund
movements in 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 Armada Intermediate Bond Fund
are denominated and the prices of forward contracts, Armada GNMA Fund
futures 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 Armada Michigan Municipal Bond Fund
imposed by an exchange, and government Armada Treasury Plus Money Market Fund
regulations may restrict trading in currencies,
futures contracts and options.
Page 97 of 137
<PAGE>
<CAPTION>
<S> <C>
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
Armada Treasury Plus Money Market Fund
Page 98 of 137
<PAGE>
In addition, the following leveraged instruments are subject to certain specific
risks:
<CAPTION>
<S> <C>
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
<CAPTION>
<S> <C>
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
The Funds may use futures contracts and related Armada Mid Cap Growth Fund
options for bona fide hedging purposes to offset Armada U.S. Government Income Fund
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.
Page 99 of 137
<PAGE>
<CAPTION>
<S> <C>
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 Armada Tax Managed Equity Fund
an option is obligated to sell (a call option) or Armada Core Equity Fund
buy (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 Armada Mid Cap Growth Fund
cash or liquid securities equal in value to the Armada U.S. Government Income Fund
exercise price of the call option written by the Armada Michigan Municipal Bond Fund
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.
<CAPTION>
<S> <C>
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.
<CAPTION>
<S> <C>
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
Page 100 of 137
<PAGE>
type of property. These factors may increase the
volatility of the Fund's investments in REITs.
<CAPTION>
<S> <C>
REGIONAL RISK-- To the extent that the/a Fund's investments Armada Ohio Tax Exempt Bond Fund
are concentrated in a specific geographic region, the Fund Armada Pennsylvania Municipal Bond Fund
may be subject to the political and other developments Armada Ohio Municipal Money Market Fund
affecting 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.
<CAPTION>
<S> <C>
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.
Page 101 of 137
<PAGE>
<CAPTION>
<S> <C>
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, Armada Small Cap Value Fund
computer difficulties in foreign markets and with foreign Armada Small Cap Growth Fund
institutions as a result of the year 2000 may add to the Armada Equity Growth Fund
possibility of 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 102 of 137
<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 June 30, 1999, IMC had approximately $25.4 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 103 of 137
<PAGE>
<TABLE>
<CAPTION>
The table below shows the IMC management teams responsible for each Fund as well
as the advisory fees IMC received for each Fund for the fiscal period ended May
31, 1999.
- -------------------------------------------------------------------------------------------------------------------
ADVISORY FEES PAID AS
A PERCENTAGE OF
MANAGEMENT TEAM/ INVESTMENT AVERAGE NET ASSETS FOR
FUND NAME ADVISER THE FISCAL YEAR ENDED
MAY 31, 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Equity Fund International Equity Team 1.04%(1)
- -------------------------------------------------------------------------------------------------------------------
Small Cap Value Fund Equity Value Team 0.92%(1)
- -------------------------------------------------------------------------------------------------------------------
Small Cap Growth Fund Equity Growth Team 0.93%(1)
- -------------------------------------------------------------------------------------------------------------------
Equity Growth Fund Equity Growth Team 0.75%
- -------------------------------------------------------------------------------------------------------------------
Tax Managed Equity Fund Equity Growth Team 0.57%
- -------------------------------------------------------------------------------------------------------------------
National Asset Management Corporation
Core Equity Fund (sub-adviser) 0.75%
- -------------------------------------------------------------------------------------------------------------------
Equity Index Fund Equity Team 0.00%
- -------------------------------------------------------------------------------------------------------------------
Equity Income Fund Equity Value Team 0.75%
- -------------------------------------------------------------------------------------------------------------------
Balanced Allocation Fund Equity and Fixed Income Teams 0.75%(2)
- -------------------------------------------------------------------------------------------------------------------
National Asset Management Corporation
Total Return Advantage Fund (sub-adviser) 0.35%
- -------------------------------------------------------------------------------------------------------------------
Bond Fund Taxable Fixed Income Team 0.55%
- -------------------------------------------------------------------------------------------------------------------
Intermediate Bond Fund Taxable Fixed Income Team 0.40%
- -------------------------------------------------------------------------------------------------------------------
GNMA Fund Taxable Fixed Income Team 0.55%
- -------------------------------------------------------------------------------------------------------------------
Enhanced Income Fund Taxable Fixed Income Team 0.22%(1)
- -------------------------------------------------------------------------------------------------------------------
Ohio Tax Exempt Bond Fund Tax Exempt Fixed Income Team 0.05%(1)
- -------------------------------------------------------------------------------------------------------------------
Pennsylvania Municipal Bond Tax Exempt Fixed Income Team
Fund 0.20%
- -------------------------------------------------------------------------------------------------------------------
National Tax Exempt Bond Fund Tax Exempt Fixed Income Team 0.04%(1)
- -------------------------------------------------------------------------------------------------------------------
Ohio Municipal Money Market 0.13%(1)(2)
Fund Tax Exempt Money Market Team
- -------------------------------------------------------------------------------------------------------------------
Pennsylvania Tax Exempt 0.15%
Money Market Fund Tax Exempt Money Market Team
- -------------------------------------------------------------------------------------------------------------------
Tax Exempt Money Market 0.15%
Fund Tax Exempt Money Market Team
- -------------------------------------------------------------------------------------------------------------------
Money Market Fund Taxable Money Market Team 0.25%
- -------------------------------------------------------------------------------------------------------------------
Government Money Market 0.25%
Fund Taxable Money Market Team
- -------------------------------------------------------------------------------------------------------------------
Treasury Money Market Fund Taxable Money Market Team 0.25%
- -------------------------------------------------------------------------------------------------------------------
Mid Cap Growth Fund Equity Growth Team 1.00%(3)
- -------------------------------------------------------------------------------------------------------------------
Large Cap Ultra Fund Equity Growth Team 0.75%(3)
- -------------------------------------------------------------------------------------------------------------------
U.S. Government Income Fund Tax Exempt Fixed Income Team 0.55%(3)
- -------------------------------------------------------------------------------------------------------------------
Michigan Municipal Bond Fund Tax Exempt Fixed Income Team 0.55%(3)
- -------------------------------------------------------------------------------------------------------------------
Treasury Plus Money Market
Fund Tax Exempt Fixed Income Team 0.30%(3)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Advisor fee or waiver changed during period.
(2) Annualized.
(3) The Fund has not yet commenced operations.
Page 104 of 137
<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 of $1.00
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) the following business day.
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,
Page 105 of 137
<PAGE>
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.
NON-MONEY MARKET FUNDS
In calculating NAV, a non-money market fund generally values its investment
portfolio at market price. In the event that a sale of a particular fixed income
security is not reported for that day, fixed income securities are priced at the
mean between the most recent quoted bid and asked prices. Unlisted securities
and securities traded on a national securities market for which market
quotations are readily available are valued at the mean between the most recent
bid and asked prices. In the event that a sale of a particular equity security
is not reported for that day, shares are priced at the last bid quotation. 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.
MONEY MARKET FUNDS
In calculating NAV for the money market funds, 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.
Page 106 of 137
<PAGE>
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within seven Business Days after we
receive your request in good order. Good order means that your request includes
complete information on your purchase, exchange or redemption and that the Fund
has received the appropriate assets. Your proceeds can be wired to your bank
account. Armada Funds do not charge a fee to wire your funds; however, your
institution may charge a fee. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK,
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. The Armada Tax Managed Equity Fund
may fund redemptions of $1 million or more with appreciated securities rather
than cash.
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, 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 107 of 137
<PAGE>
<TABLE>
<CAPTION>
Distribution fees, as a percentage of average daily net assets are as follows:
<S> <C>
Armada International Equity Fund 0.04%
Armada Small Cap Value Fund 0.04%
Armada Small Cap Growth Fund 0.04%
Armada Equity Growth Fund 0.04%
Armada Tax Managed Equity Fund 0.04%
Armada Core Equity Fund 0.04%
Armada Equity Index Fund N/A%
Armada Equity Income Fund 0.04%
Armada Balanced Allocation Fund 0.04%
Armada Total Return Advantage Fund N/A%
Armada Bond Fund 0.04%
Armada Intermediate Bond Fund 0.04%
Armada GNMA Fund 0.04%
Armada Enhanced Income Fund N/A%
Armada Ohio Tax Exempt Bond Fund 0.04%
Armada Pennsylvania Municipal Bond Fund N/A%
Armada National Tax Exempt Bond Fund 0.04%
Armada Ohio Municipal Money Market Fund 0.04%
Armada Pennsylvania Tax Exempt Money Market Fund 0.04%
Armada Tax Exempt Money Market Fund 0.04%
Armada Money Market Fund 0.04%
Armada Government Money Market Fund 0.04%
Armada Treasury Money Market Fund 0.04%
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 108 of 137
<PAGE>
DIVIDENDS AND TAXES
<TABLE>
<CAPTION>
Each Fund distributes its income as follows:
<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 Monthly*
Armada Large Cap Ultra Fund Monthly*
Armada U.S. Government Income Fund Monthly*
Armada Michigan Municipal Bond Fund Monthly*
Armada Treasury Plus Money Market Fund Monthly*
</TABLE>
* As of the printing of this prospectus, these Funds have not yet commenced
operations.
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.
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
Page 109 of 137
<PAGE>
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, or an in-kind
redemption, 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
Page 110 of 137
<PAGE>
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 111 of 137
<PAGE>
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, except for the
financial highlights of the Bond Fund, GNMA Fund, Pennsylvania Municipal Fund
and Pennsylvania Tax Exempt Money Market Fund for each Fund's respective
commencement of operations date through May 31, 1996, has been audited by Ernst
& Young LLP, independent auditors. Their report, along with each Fund's
financial statements, appears in the annual report that accompanies our
Statement of Additional Information. The financial highlights of the Bond Fund,
GNMA Fund, Pennsylvania Municipal Fund and Pennsylvania Tax Exempt Money Market
Fund for each Fund's respective commencement of operations date through May 31,
1996 were audited by Coopers & Lybrand, L.L.P., each Fund's predecessor
independent accountants. You can obtain the annual report, which contains more
performance information, at no charge by calling 1-800-622-FUND (3863)
Page 112 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA INTERNATIONAL EQUITY FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR ENDED FOR THE PERIOD
MAY 31, 1999 ENDED MAY 31, 1998
CLASS I CLASS I(1)
<S> <C> <C>
Net asset value, beginning of period $10.86 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.01) 0.08
Net gain on securities (realized and unrealized) 0.11 0.79
Total from investment operations 0.10 0.87
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.01)
Total distributions (0.05) (0.01)
Net asset value, end of period $10.91 $10.86
TOTAL RETURN 0.95% 8.76%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $199,205 $135,942
Ratio of expenses to average net assets 1.43% 1.09%(3)
Ratio of net investment income/(loss) to average net assets 0.12% 1.19%(3)
Ratio of expenses to average net assets before fee waivers 1.43% 1.24%(3)
Ratio of net investment income/(loss) to average net assets before 0.12% 1.04%(3)
fee waivers
Portfolio turnover rate 78% 28%
</TABLE>
(1) CLASS I COMMENCED OPERATIONS ON AUGUST 1, 1997.
(2) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(3) ANNUALIZED.
Page 113 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA SMALL CAP VALUE FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD FOR THE PERIOD ENDED
FOR THE YEAR ENDED MAY 31, MAY 31,
1999 1998 1997 1996 1995
CLASS I CLASS I CLASS I CLASS I CLASS I(1)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.72 $ 15.15 $ 13.10 $ 11.38 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.09 0.06 0.09 0.08 0.10
Net gain/(loss) on securities (realized and unrealized) (0.78) 2.87 2.90 2.41 1.36
Total from investment operations (0.69) 2.93 2.99 2.49 1.46
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.07) (0.09) (0.08) (0.04)
Dividends in excess of net investment income (0.00) (0.00) (0.00) (0.02) (0.00)
Distributions from net realized capital gains (1.33) (2.29) (0.85) (0.67) (0.04)
Total distributions (1.38) (2.36) (0.94) (0.77) (0.08)
Net asset value, end of period $ 13.65 $ 15.72 $ 15.15 $ 13.10 $ 11.38
TOTAL RETURN (3.67)% 19.82% 23.61% 22.64% 17.42%(3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $270,382 $284,295 $199,311 $99,294 $50,993
Ratio of expenses to average net assets 1.12% 0.98% 0.97% 1.05% 1.01%(2)
Ratio of net investment income/(loss) to average net assets 0.70% 0.43% 0.83% 0.83% 1.31%(2)
Ratio of expenses to average net assets before fee waivers 1.12% 0.98% 0.97% 1.06% 1.15%(2)
Ratio of net investment income/(loss) to average net 0.70% 0.43% 0.83% 0.82% 1.17%(2)
assets before fee waivers
Portfolio turnover rate 79% 89% 64% 106% 69%
</TABLE>
(1) CLASS I COMMENCED OPERATIONS ON JULY 26, 1994.
(2) ANNUALIZED.
(3) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
Page 114 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA SMALL CAP GROWTH FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR ENDED FOR THE PERIOD
MAY 31, 1999 ENDED MAY 31, 1998
CLASS I CLASS I(2)
<S> <C> <C>
Net asset value, beginning of period $ 11.69 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.03)(4) 0.01
Net gain/(loss) on securities (realized and unrealized) (1.41) 1.72
Total from investment operations (1.44) 1.73
LESS DISTRIBUTIONS
Dividends from net investment income (0.00) (0.01)
Distributions from net realized capital gains (0.11) (0.03)
Total distributions (0.11) (0.04)
Net asset value, end of period $ 10.14 $ 11.69
TOTAL RETURN (12.36)% 17.35%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $80,145 $54,476
Ratio of expenses to average net assets 1.27% 0.98%(3)
Ratio of net investment income/(loss) to average net assets (0.27)% 0.14%(3)
Ratio of expenses to average net assets before fee waivers 1.27% 1.09%(3)
Ratio of net investment income/(loss) to average net (0.27)% 0.03%(3)
assets before fee waivers
Portfolio turnover rate 159% 31%
</TABLE>
(1) RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
(2) CLASS I COMMENCED OPERATIONS ON AUGUST 1, 1997.
(3) ANNUALIZED.
(4) CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
Page 115 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA EQUITY GROWTH FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
CLASS I CLASS I CLASS I CLASS I CLASS I
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.35 $ 18.63 $ 18.02 $ 14.77 $ 13.66
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.03)(1) (0.00) 0.09 0.14 0.21
Net gain on securities (realized and unrealized) 4.28 5.00 4.66 3.46 1.21
Total from investment operations 4.25 5.00 4.75 3.60 1.42
LESS DISTRIBUTIONS
Dividends from net investment income (0.00) (0.01) (0.09) (0.14) (0.20)
Dividends in excess of net investment income (0.00) (0.00) (0.02) (0.02) (0.00)
Distributions from net realized capital gains (0.99) (2.27) (4.03) (0.19) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.00) (0.00) (0.00) (0.11)
Total distributions (0.99) (2.28) (4.14) (0.35) (0.31)
Net asset value, end of period $ 24.61 $ 21.35 $ 18.63 $ 18.02 $ 14.77
TOTAL RETURN 20.16% 28.65% 29.57% 24.61% 10.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,262,154 $352,413 $255,594 $166,671 $119,634
Ratio of expenses to average net assets 0.92% 0.98% 0.97% 1.01% 1.01%
Ratio of net investment income/(loss) to average net assets (0.11)% (0.01)% 0.49% 0.85% 1.53%
Ratio of expenses to average net assets before fee waivers 0.92% 0.98% 0.97% 1.03% 1.02%
Ratio of net investment income/(loss) to average net (0.11)% (0.01)% 0.49% 0.83% 1.51%
assets before fee waivers
Portfolio turnover rate 57% 260% 197% 74% 17%
</TABLE>
1 CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
Page 116 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA TAX MANAGED EQUITY FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR ENDED FOR THE PERIOD ENDED
MAY 31, 1999 MAY 31, 1998
CLASS I CLASS I(1)
<S> <C> <C>
Net asset value, beginning of period $ 9.93 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 (0.00)
Net gain/(loss) loss on securities (realized and unrealized) 2.21 (0.07)
Total from investment operations 2.26 (0.07)
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.00)
Distributions from net realized capital gains (0.01) (0.00)
Total distributions (0.06) (0.00)
Net asset value, end of period $ 12.13 $9.93
TOTAL RETURN 22.82% (4.81%)5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $241,501 $158,867
Ratio of expenses to average net assets 0.83% 0.29%(2)
Ratio of net investment income/(loss) to average net assets 0.37% 0.91%(2)
Ratio of expenses to average net assets before fee waivers 1.01% 1.02%(2)
Ratio of net investment income/(loss) to average net 0.19% 0.18%(2)
assets before fee waivers
Portfolio turnover rate 5% 0%
</TABLE>
1 CLASS I COMMENCED OPERATIONS ON APRIL 9, 1998.
2 ANNUALIZED.
Page 117 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA CORE EQUITY FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR ENDED FOR THE PERIOD ENDED
MAY 31, 1999 MAY 31, 1999
CLASS I CLASS I(2)
<S> <C> <C>
Net asset value, beginning of period $ 11.35 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) (0.02)(4) 0.05
Net gain on securities (realized and unrealized) 2.94 1.35
Total from investment operations 2.92 1.40
LESS DISTRIBUTIONS
Dividends from net investment income (0.01) (0.05)
Distributions from net realized capital gains (0.51) (0.00)
Total distributions (0.52) (0.05)
Net asset value, end of period $ 13.75 $ 11.35
TOTAL RETURN 26.08% 14.03%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $145,603 $110,504
Ratio of expenses to average net assets 0.98% 0.89%(3)
Ratio of net investment income/(loss) to average net assets (0.15)% 0.61%(3)
Ratio of expenses to average net assets before fee waivers 0.98% 1.06%(3)
Ratio of net investment income/(loss) to average net assets (0.15)% 0.44%(3)
before fee waivers
Portfolio turnover rate 43% 60%
</TABLE>
1 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
2 CLASS I COMMENCED OPERATIONS ON AUGUST 1, 1997.
3 ANNUALIZED.
4 CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
Page 118 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA EQUITY INDEX FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE PERIOD ENDED
MAY 31, 1999
CLASS I(1)
<S> <C>
Net asset value, beginning of period $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.11
Net gain on securities (realized and unrealized) 1.29
Total from investment operations 1.40
LESS DISTRIBUTIONS
Dividends from net investment income (0.08)
Total distributions (0.08)
Net asset value, end of period $ 11.32
TOTAL RETURN 14.16%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $253,854
Ratio of expenses to average net assets 0.20%(3)
Ratio of net investment income to average net assets 1.38%(3)
Ratio of expenses to average net assets before fee waivers 0.55%(3)
Ratio of net investment income to average net assets before 1.03%(3)
fee waivers
Portfolio turnover rate 9%
</TABLE>
1 CLASS I COMMENCED OPERATIONS ON JULY 10, 1998.
2 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
3 ANNUALIZED.
Page 119 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA EQUITY INCOME FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE PERIOD ENDED
FOR THE YEAR ENDED MAY 31, MAY 31,
1999 1998 1997 1996 1995
CLASS I CLASS I CLASS I CLASS I CLASS I(1)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.53 $ 14.87 $ 12.66 $ 11.01 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.30 0.27 0.30 0.34 0.34
Net gain on securities (realized and unrealized) 1.50 3.44 2.73 1.79 0.94
Total from investment operations 1.80 3.71 3.03 2.13 1.28
LESS DISTRIBUTIONS
Dividends from net investment income (0.28) (0.32) (0.31) (0.34) (0.27)
Distributions from net realized capital gains (0.25) (0.73) (0.51) (0.14) (0.00)
Total distributions (0.53) (1.05) (0.82) (0.48) (0.27)
Net asset value, end of period $ 18.80 $ 17.53 $ 14.87 $ 12.66 $ 11.01
TOTAL RETURN 10.62% 25.69% 24.62% 19.72% 14.34%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $548,361 $193,923 $127,130 $61,978 $36,194
Ratio of expenses to average net assets 0.93% 0.92% 1.01% 1.06% 0.99%(2)
Ratio of net investment income to average net assets 2.07% 1.80% 2.44% 3.02% 3.87%(2)
Ratio of expenses to average net assets before fee waivers 0.93% 0.92% 1.01% 1.08% 1.21%(2)
Ratio of net investment income to average net assets 2.07% 1.80% 2.44% 3.00% 3.66%(2)
before fee waivers
Portfolio turnover rate 19% 18% 35% 53% 12%
</TABLE>
1 CLASS I COMMENCED OPERATIONS ON JULY 1, 1994.
2 ANNUALIZED.
Page 120 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA BALANCED ALLOCATION FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE PERIOD
ENDED MAY 31, 1999
CLASS I(2)
<S> <C>
Net asset value, beginning of period $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.18
Net gain on securities (realized and unrealized) 0.28
Total from investment operations 0.46
LESS DISTRIBUTIONS
Dividends from net investment income (0.15)
Total distributions (0.15)
Net asset value, end of period $ 10.31
TOTAL RETURN 4.57%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $85,027
Ratio of expenses to average net assets 1.06%(3)
Ratio of net investment income to average net assets 2.25%(3)
Ratio of expenses to average net assets before fee waivers 1.06%(3)
Ratio of investment income to average net assets before fee 2.25%(3)
waivers
Portfolio turnover rate 116%
</TABLE>
1 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
2 CLASS I COMMENCED OPERATIONS ON JULY 10, 1998.
3 ANNUALIZED.
Page 121 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA TOTAL RETURN ADVANTAGE FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE PERIOD
FOR THE YEAR ENDED MAY 31, ENDED MAY 31,
1999 1998 1997 1996 1995
CLASS I CLASS I CLASS I CLASS I CLASS I(1)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.25 $ 9.89 $ 9.88 $ 10.55 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.58 0.64 0.67 0.70(4) 0.65(4)
Net gain/(loss) on securities (realized and unrealized) (0.22) 0.36 0.15 (0.24) 0.43
Total from investment operations 0.36 1.00 0.82 0.46 1.08
LESS DISTRIBUTIONS
Dividends from net investment income (0.58) (0.64) (0.67) (0.70) (0.53)
Dividends in excess of net investment income (0.00) (0.00) (0.00) (0.12) (0.00)
Distributions from net realized capital gains (0.04) (0.00) (0.00) (0.31) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.00) (0.14) (0.00) (0.00)
Total distributions (0.62) (0.64) (0.81) (1.13) (0.53)
Net asset value, end of period $ 9.99 $ 10.25 $ 9.89 $ 9.88 $ 10.55
TOTAL RETURN 3.54% 10.35% 8.51% 4.22% 12.52%(3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $328,417 $ 296,075 $259,228 $280,401 $261,403
Ratio of expenses to average net assets 0.45% 0.31% 0.16% 0.13% 0.18%(2)
Ratio of net investment income to average net assets 5.72% 6.29% 6.70% 6.67% 7.23%(2)
Ratio of expenses to average net assets before fee waivers 0.65% 0.72% 0.71% 0.69% 0.77%(2)
Ratio of net investment income to average net assets 5.52% 5.88% 6.15% 6.11% 6.64%(2)
before fee waivers
Portfolio turnover rate 142% 170% 169% 268% 166%
</TABLE>
1 CLASS I COMMENCED OPERATIONS ON JULY 7, 1994.
2 ANNUALIZED.
3 TOTAL RETURNS HAVE BEEN ANNUALIZED BASED UPON THE PERIOD FROM COMMENCEMENT
DATE THROUGH MAY 31, 1995. GROSS TOTAL RETURNS OF CLASS I FOR THE PERIOD WERE
11.22%.
4 CALCULATED BASED ON AVERAGE SHARES OUTSTANDING.
Page 122 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE FOR THE FOR THE
FOR THE YEAR ENDED MAY 31, PERIOD YEAR ENDED PERIOD ENDED
1999 1998 1997 ENDED MAY APRIL 30, APRIL 30,
CLASS I CLASS I CLASS I(3) 31, 1996(3) 1996(3) 1995(3)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.27 $ 10.02 $ 9.97 $ 10.04 $ 10.02 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.56 0.59 0.59 0.05 0.64 0.44
Net gain/(loss) on securities (realized and unrealized) (0.17) 0.25 0.13 (0.07) 0.07 0.02
Total from investment operations 0.39 0.84 0.72 (0.02) 0.71 0.46
LESS DISTRIBUTIONS
Dividends from net investment income (0.56) (0.59) (0.59) (0.05) (0.64) (0.44)
Distributions from net realized capital gains (0.14) (0.00) (0.00) (0.00) (0.05) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.00) (0.08) (0.00) (0.00) (0.00)
Total distributions (0.70) (0.59) (0.67) (0.05) (0.69) (0.44)
Net asset value, end of period $ 9.96 $ 10.27 $ 10.02 $ 9.97 $ 10.04 $ 10.02
TOTAL RETURN 3.82% 8.55% 7.41% (0.19)%(2,4) 7.09%(4) 4.75%(2,4)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $758,713 $132,620 $91,161 $88,829 $89,901 $53,316
Ratio of expenses to average net assets 0.70% 0.80% 0.83% 0.85%(1) 0.85% 0.85%(1)
Ratio of net investment income to average net assets 5.44% 5.72% 5.83% 5.88%(1) 6.20% 6.17%(1)
Ratio of expenses to average net assets before fee waivers 0.70% 0.80% 0.96% 1.25%(1) 1.25% 1.33%(1)
Ratio of net investment income to average net assets before 5.44% 5.72% 5.71% 5.48%(1) 5.80% 5.69%(1)
fee waivers
Portfolio turnover rate 270% 220% 96% 2% 94% 172%
</TABLE>
1 ANNUALIZED.
2 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
3 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF A PREDECESSOR FUND THROUGH
SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON AUGUST 10,
1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL YEAR-END FROM
APRIL 30 TO MAY 31.
4 TOTAL RETURN EXCLUDES SALES CHARGE.
Page 123 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA INTERMEDIATE BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
CLASS I CLASS I CLASS I CLASS I CLASS I
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.59 $ 10.37 $10.30 $10.54 $10.24
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.56 0.60 0.6 0.61 0.63
Net gain/ (loss) on securities (realized and unrealized) (0.14) 0.22 0.07 (0.22) 0.30
Total from investment operations 0.42 0.82 0.67 0.39 0.93
LESS DISTRIBUTIONS
Dividends from net investment income (0.56) (0.60) (0.6) (0.61) (0.63)
Distributions from net realized capital gains (0.06) (0.00) (0.00) (0.00) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.00) (0.00) (0.02) (0.00)
Total distributions (0.62) (0.60) (0.6) (0.63) (0.63)
Net asset value, end of period $ 10.39 $ 10.59 $10.37 $10.30 $10.54
TOTAL RETURN 3.98% 8.09% 6.63% 3.79% 9.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $313,368 $166,710 $121,271 $111,240 $88,047
Ratio of expenses to average net assets 0.61% 0.65% 0.70% 0.80% 0.85%
Ratio of net investment income to average net assets 5.21% 5.71% 5.76% 5.78% 6.24%
Ratio of expenses to average net assets before fee waivers 0.75% 0.80% 0.79% 0.82% 0.86%
Ratio of net investment income To average net assets before 5.07% 5.56% 5.66% 5.76% 6.23%
fee waivers
Portfolio turnover rate 256% 160% 217% 45% 42%
</TABLE>
Page 124 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA GNMA FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE FOR THE FOR THE
FOR THE YEAR ENDED MAY 31, PERIOD YEAR ENDED PERIOD ENDED
1999 1998 1997 ENDED MAY APRIL 30, APRIL 30,
CLASS I CLASS I CLASS I(3) 31, 1996(3) 1996(3) 1995(3)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.36 $ 10.15 $ 10.03 $ 10.12 $ 10.16 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.61 0.61 0.65 0.05 0.66 0.48
Net gain/(loss) on securities (realized and unrealized) (0.20) 0.31 0.22 (0.09) 0.14 0.16
Total from investment operations 0.41 0.92 0.87 (0.04) 0.80 0.64
LESS DISTRIBUTIONS
Dividends from net investment income (0.60) (0.61) (0.65) (0.05) (0.66) (0.48)
Dividends from net realized capital gains (0.07) (0.10) (0.01) (0.00) (0.18) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.00) (0.09) (0.00) (0.00) (0.00)
Total distributions (0.67) (0.71) (0.75) (0.05) (0.84) (0.48)
Net asset value, end of period $ 10.10 $ 10.36 $ 10.15 $ 10.03 $ 10.12 $ 10.16
TOTAL RETURN 4.02% 9.17% 9.03% (0.35)%(2,4) 7.97%(4) 6.61%(2,4)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $96,808 $83,624 $64,501 $60,532 $62,161 $42,212
Ratio of expenses to average net assets 0.78% 0.84% 0.86% 0.85%(1) 0.85% 0.85%(1)
Ratio of net investment income to average net assets 5.92% 5.83% 6.45% 6.33%(1) 6.30% 6.68%(1)
Ratio of expenses to average net assets before fee waivers 0.78% 0.84% 1.01% 1.28%(1) 1.29% 1.40%(1)
Ratio of net investment income to average net assets before 5.92% 5.83% 6.30% 5.90%(1) 5.86% 6.13%(1)
fee waivers
Portfolio turnover rate 85% 291% 57% 1% 149% 226%
</TABLE>
1 ANNUALIZED.
2 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
3 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF THE PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON
AUGUST 10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL
YEAR-END FROM APRIL 30 TO MAY 31.
4 TOTAL RETURN EXCLUDES SALES CHARGE.
Page 125 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA ENHANCED INCOME FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR ENDED MAY 31, FOR THE PERIOD
1999 1998 1997 1996 ENDED MAY 31, 1995
CLASS I CLASS I CLASS I CLASS I CLASS I(1)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.06 $9.99 $10.01 $10.16 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.56 0.57 0.58 0.58 0.51(4)
Net gain/(loss) on securities (realized and unrealized) (0.05) 0.08 0.01 (0.05) 0.06
Total from investment operations 0.51 0.65 0.59 0.53 0.57
LESS DISTRIBUTIONS
Dividends from net investment income (0.56) (0.57) (0.58) (0.58) (0.41)
Dividends in excess of net investment income 0.00 (0.00) (0.00) (0.10) (0.00)
Distributions of net realized capital gains (0.05) (0.01) (0.03) (0.00) (0.00)
Total distributions (0.61) (0.58) (0.61) (0.68) (0.41)
Net asset value, end of period $9.96 $10.06 $9.99 $10.01 $10.16
TOTAL RETURN 5.14% 6.68% 6.02% 5.36% 6.54%(2,3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $72,291 $71,888 $61,031 $66,918 $60,467
Ratio of expenses to average net assets 0.43% 0.33% 0.21% 0.23% 0.21%(2)
Ratio of net investment income to average net assets 5.49% 5.69% 5.74% 5.72% 5.70%(2)
Ratio of expenses to average net assets before fee waivers 0.65% 0.69% 0.66% 0.70% 0.71%(2)
Ratio of net investment income to average net assets before 5.27% 5.33% 5.29% 5.25% 5.20%(2)
fee waivers
Portfolio turnover rate 190% 135% 225% 98% 36%
</TABLE>
1 CLASS I COMMENCED OPERATIONS ON JULY 7, 1994.
2 ANNUALIZED.
3 TOTAL RETURNS HAVE BEEN ANNUALIZED BASED UPON THE PERIOD FROM THE
COMMENCEMENT DATE THROUGH MAY 31, 1995. GROSS TOTAL RETURNS OF THE CLASS I
FOR THE PERIOD WERE 5.87%.
4 CALCULATION BASED UPON AVERAGE SHARES OUTSTANDING.
Page 126 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA OHIO TAX EXEMPT BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH YEAR
FOR THE YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
CLASS I CLASS I CLASS I CLASS I CLASS I
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.13 $10.86 $10.70 $ 10.74 $10.57
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.53 0.51 0.51 0.50 0.50
Net gain/(loss) on securities (realized and unrealized) (0.09) 0.28 0.16 (0.04) 0.17
Total from investment operations 0.44 0.79 0.67 0.46 0.67
LESS DISTRIBUTIONS
Dividends from net investment income (0.53) (0.51) (0.51) (0.50) (0.50)
Distributions from net realized capital gains (0.01) (0.01) (0.00) (0.00) (0.00)
Total distributions (0.54) (0.52) (0.51) (0.50) (0.50)
Net asset value, end of period $ 11.03 $ 11.13 $10.86 $ 10.70 $10.74
TOTAL RETURN 3.94% 7.43% 6.37% 4.36% 6.61%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $205,365 $165,395 $91,366 $82,886 $71,996
Ratio of expenses to average net assets 0.28% 0.25% 0.24% 0.26% 0.24%
Ratio of net investment income to average net assets 4.77% 4.67% 4.71% 4.68% 4.82%
Ratio of expenses to average net assets before fee waivers 0.78% 0.80% 0.79% 0.83% 0.80%
Ratio of net investment income to average net assets 4.27% 4.12% 4.16% 4.11% 4.26%
before fee waivers
Portfolio turnover rate 19% 15% 23% 10% 3%
</TABLE>
Page 127 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA PENNSYLVANIA MUNICIPAL BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR ENDED MAY 31,
FOR THE FOR THE
PERIOD FOR THE PERIOD
ENDED YEAR ENDED ENDED
1999 1998 1997 MAY 31, APRIL 30, APRIL 30,
CLASS I CLASS I CLASS I(3) 1996(3) 1996(3) 1995(3)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.45 $ 10.22 $ 10.08 $ 10.12 $10.04 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.51 0.46 0.44 0.04 0.43 0.29
Net gain/(loss) on securities (realized and unrealized) (0.07) 0.24 0.17 (0.04) 0.08 0.04
Total from investment operations 0.44 0.70 0.61 0.00 0.51 0.33
LESS DISTRIBUTIONS
Dividends from net investment income (0.49) (0.46) (0.44) (0.04) (0.43) (0.29)
Distributions from net realized capital gains (0.01) (0.00) (0.02) (0.00) (0.00) (0.00)
Distributions in excess of net realized capital gains (0.00) (0.01) (0.01) (0.00) (0.00) (0.00)
Total distributions (0.50) (0.47) (0.47) (0.04) (0.43) (0.29)
Net asset value, end of period $ 10.39 $ 10.45 $ 10.22 $ 10.08 $ 10.12 $10.04
TOTAL RETURN 4.21% 6.95% 6.21% (0.03)%(1,4) 5.06%(4) 3.38%(2,4)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $40,171 $38,753 $36,769 $38,733 $38,809 $34,638
Ratio of expenses to average net assets 0.48% 0.69% 0.87% 0.85%(1) 0.85% 0.85%(1)
Ratio of net investment income to average net assets 4.80% 4.40% 4.35% 4.32%(1) 4.16% 4.05%(1)
Ratio of expenses to average net assets before fee 0.83% 0.84% 1.02% 1.31%(1) 1.24% 1.36%(1)
waivers
Ratio of net investment income to average net assets 4.45% 4.25% 4.20% 3.86%(1) 3.77% 3.54%(1)
before fee waivers
Portfolio turnover rate 15% 20% 42% 0% 22% 4%
</TABLE>
1 ANNUALIZED.
2 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
3 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF THE PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON
AUGUST 10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL YEAR
END FROM APRIL 30 TO MAY 31.
4 TOTAL RETURN EXCLUDES SALES CHARGE.
Page 128 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA NATIONAL TAX EXEMPT BOND FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR FOR THE PERIOD
ENDED MAY 31, 1999 ENDED MAY 31, 1998
CLASS I CLASS I(1)
<S> <C> <C>
Net asset value, beginning of period $ 10.03 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.45 0.07
Net gain/(loss) on securities (realized and unrealized) (0.04) 0.03
Total from investment operations 0.41 0.10
LESS DISTRIBUTIONS
Dividends from net investment income (0.45) (0.07)
Distribution from net realized capital gains (0.03) (0.00)
Total distributions (0.48) (0.07)
Net asset value, end of period $ 9.96 $ 10.03
TOTAL RETURN 4.07% 7.03%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $100,638 $80,259
Ratio of expenses to average net assets 0.36% 0.33%(2)
Ratio of net investment income to average net assets 4.39% 4.62%(2)
Ratio of expenses to average net assets before fee 0.87% 0.87%(2)
waivers
Ratio of net investment income to average net assets 3.88% 4.08%(2)
before fee waivers
Portfolio turnover rate 23% 0%
</TABLE>
1 CLASS I COMMENCED OPERATIONS ON APRIL 9, 1998.
2 ANNUALIZED.
Page 129 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA OHIO MUNICIPAL MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE PERIOD
ENDED MAY 31, 1999
<S> <C>
CLASS I(1)
Net asset value, beginning of period $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02
LESS DISTRIBUTIONS
Dividends from net investment income (0.02)
Net asset value, end of period $ 1.00
TOTAL RETURN 2.01%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $99,342
Ratio of expenses to average net assets 0.35%(3)
Ratio of net investment income to average net assets 2.77%(3)
Ratio of expenses to average net assets before fee waivers 0.55%(3)
Ratio of net investment income to average net assets before 2.57%(3)
fee waivers
</TABLE>
1 CLASS I COMMENCED OPERATIONS ON SEPTEMBER 15, 1998.
2 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
3 ANNUALIZED.
Page 130 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR YEAR FOR THE FOR THE
ENDED MAY PERIOD FOR THE PERIOD
31, ENDED YEAR ENDED ENDED
1999 1998 1997 MAY 31, APRIL 30, APRIL 30,
CLASS I CLASS I CLASS I(3) 1996(3) 1996(3) 1995(3)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.03 0.03 0.00 0.03 0.02
LESS DISTRIBUTIONS
Dividends from net investment income (0.03) (0.03) (0.03) (0.00) (0.03) (0.02)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 2.92% 3.41% 3.26% 0.28%(2) 3.36% 2.32%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $77,214 $73,264 $60,876 $68,742 $70,422 $56,668
Ratio of expenses to average net assets 0.34% 0.34% 0.41% 0.55%(1) 0.55% 0.55%(1)
Ratio of net investment income to average net assets 2.82% 3.35% 3.20% 3.24%(1) 3.29% 3.21%(1)
Ratio of expenses to average net assets before fee waivers 0.59% 0.58% 0.74% 0.97%(1) 0.96% 1.04%(1)
Ratio of net investment income to average net assets 2.57% 3.11% 2.87% 2.82%(1) 2.88% 2.72%(1)
before fee waivers
</TABLE>
1 ANNUALIZED.
2 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
3 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF THE PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON
AUGUST 10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL YEAR
END FROM APRIL 30 TO MAY 31.
Page 131 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA TAX EXEMPT MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
CLASS I CLASS I CLASS I CLASS I CLASS I
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.03 0.03 0.03 0.03
LESS DISTRIBUTIONS
Dividends from net investment income (0.03) (0.03) (0.03) (0.03) (0.03)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 3.00% 3.40% 3.23% 3.40% 3.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $434,178 $ 418,953 $370,679 $261,808 $172,643
Ratio of expenses to average net assets 0.30% 0.30% 0.29% 0.30% 0.35%
Ratio of net investment income to average net assets 2.92% 3.32% 3.18% 3.33% 3.15%
Ratio of expenses to average net assets before fee waivers 0.50% 0.50% 0.49% 0.51% 0.56%
Ratio of net investment income to average net assets before 2.72% 3.12% 2.98% 3.12% 2.94%
fee waivers
</TABLE>
Page 132 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA MONEY MARKET FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
CLASS I CLASS I CLASS I CLASS I CLASS I
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.05)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN 4.96% 5.39% 5.19% 5.45% 5.11%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $2,133,839 $1,911,689 $1,943,021 $1,344,414 $1,083,243
Ratio of expenses to average net assets 0.42% 0.38% 0.37% 0.37% 0.37%
Ratio of net investment income to average net assets 4.82% 5.27% 5.07% 5.30% 5.07%
Ratio of expenses to average net assets before fee waivers 0.52% 0.48% 0.47% 0.48% 0.48%
Ratio of net investment income to average net assets 4.72% 5.17% 4.97% 5.19% 4.96%
before fee waivers
</TABLE>
Page 133 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA GOVERNMENT MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
1999 1998 1997 1996 1995
CLASS I CLASS I CLASS I CLASS I CLASS I
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.05)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN 4.86% 5.30% 5.15% 5.41% 4.97%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,094,979 $1,137,078 $811,662 $741,894 $618,058
Ratio of expenses to average net assets 0.42% 0.40% 0.36% 0.36% 0.39%
Ratio of net investment income to average net assets 4.76% 5.17% 5.03% 5.27% 4.83%
Ratio of expenses to average net assets before fee waivers 0.52% 0.50% 0.46% 0.47% 0.50%
Ratio of net investment income to average net assets before 4.66% 5.07% 4.93% 5.16% 4.72%
fee waivers
</TABLE>
Page 134 of 137
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
ARMADA TREASURY MONEY MARKET FUND
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
CLASS I CLASS I CLASS I CLASS I CLASS I(1)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.04 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from net investment income (0.04) (0.05) (0.05) (0.05) (0.05)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN 4.39% 4.95% 4.89% 5.07% 4.86%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $346,092 $359,605 $276,327 $312,255 $142,877
Ratio of expenses to average net assets 0.41% 0.39% 0.37% 0.41% 0.43%(2)
Ratio of net investment income to average net assets 4.35% 4.84% 4.79% 4.88% 4.78%(2)
Ratio of expenses to average net assets before fee waivers 0.46% 0.44% 0.42% 0.47% 0.49%(2)
Ratio of net investment income to average net assets before 4.30% 4.79% 4.74% 4.82% 4.72%(2)
fee waivers
</TABLE>
1 CLASS I COMMENCED OPERATIONS ON JUNE 16, 1994.
2 ANNUALIZED.
Page 135 of 137
<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 each Fund is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated September 28, 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:
P.O. Box 8421
Boston, MA 02266-8421
BY INTERNET: www.armadafunds.com
Page 136 of 137
<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 Funds' Investment Company Act registration number is 811-4416.
Page 137 of 137
<PAGE>
<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>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION..............................................................................1
INVESTMENT OBJECTIVE AND POLICIES................................................................................2
INVESTMENT LIMITATIONS..........................................................................................64
NET ASSET VALUE.................................................................................................67
DIVIDENDS.......................................................................................................68
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..................................................................68
DESCRIPTION OF SHARES...........................................................................................77
ADDITIONAL INFORMATION CONCERNING TAXES.........................................................................79
TRUSTEES AND OFFICERS...........................................................................................84
ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN SERVICES AND
TRANSFER AGENCY AGREEMENTS.................................................................................88
SHAREHOLDER SERVICES PLANS......................................................................................99
PORTFOLIO TRANSACTIONS..........................................................................................99
AUDITORS ......................................................................................................102
COUNSEL .......................................................................................................102
YIELD AND PERFORMANCE INFORMATION..............................................................................102
STANDARDIZED YIELD QUOTATIONS..................................................................................110
MISCELLANEOUS..................................................................................................114
FINANCIAL STATEMENTS...........................................................................................151
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.
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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.
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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
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<PAGE>
quality and liquidity, each in relation to the market price of the stock. Stocks
purchased for the Fund generally will be listed on a national securities
exchange or will be unlisted securities with an established over-the-counter
market. The Fund 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
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May 31, 1999, the stocks in the S&P 500 had an average market capitalization of
94.1 billion and the total market capitalization of all U.S. common stocks was
10.7 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.
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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 1.7% 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,
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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
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Index ("Lehman Aggregate") as its performance benchmark. The average maturity of
the Fund will be from four to twelve years.
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).
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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" 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 BOND 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.
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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 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
Bond 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.
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.
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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."
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.
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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 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
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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.
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
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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.
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.
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"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 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
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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.
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.
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RATINGS CRITERIA
The Balanced Allocation and Michigan Municipal 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.
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
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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 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.
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 "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
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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 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, Treasury Plus Money Market, Mid Cap Growth, U.S. Government Income and
Michigan Municipal 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
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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, Government Money
Market and Treasury Plus 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.
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, 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.
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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, Treasury Plus 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.
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 Municipal 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
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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.
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
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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 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
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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 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
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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.
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
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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 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
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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, 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 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.
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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 contract 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 the purchase of futures contracts to hedge against
a possible increase in the price of securities which the Fund intends to
purchase. Similarly, if the value of a Fund's securities is expected to decline,
it might purchase put options or sell call options on futures contracts rather
than sell futures contracts.
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
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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 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.
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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 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.
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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.
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.
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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.
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 Municipal
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
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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 Municipal 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 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
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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 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.
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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 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
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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.
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 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.
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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 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
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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 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
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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.
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
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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 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 (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
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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.
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:
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- 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.
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
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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. 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.
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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.
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
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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.
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.
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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 and 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.
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.
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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.
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.
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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.
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-
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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. 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.
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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 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
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
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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.
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.
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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 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,
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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 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.
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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.
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
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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.
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
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<PAGE>
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 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
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<PAGE>
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 Municipal 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.
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.
-64-
<PAGE>
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 Bond 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 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.
-65-
<PAGE>
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 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.
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<PAGE>
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
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.
-67-
<PAGE>
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 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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<PAGE>
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 Bond Fund $
</TABLE>
*The Equity Index Fund commenced operations on October 15, 1998. 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, Michigan Municipal Bond and Treasury Plus Money Market Funds 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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<PAGE>
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>
<CAPTION>
TABLE
-----
INTERNATIONAL EQUITY FUND
-------------------------
<S> <C>
Net Assets of A Shares.................................................................. $1,127,079
Outstanding A Shares.................................................................... 103,716
Net Asset Value Per Share............................................................... $10.87
($10.87 DIVIDED BY 94.5%)
Sales Charge, 5.50% of
offering price (5.80% of
net asset value per share).............................................................. $.63
Offering to Public...................................................................... $11.50
<CAPTION>
SMALL CAP VALUE FUND
--------------------
<S> <C>
Net Assets of A Shares.................................................................. $11,542,378
Outstanding A Shares.................................................................... 866.968
Net Asset Value Per Share
($13.31 DIVIDED BY 94.5%).............................................................. $13.31
Sales Charge, 5.50% of
offering price (5.79% of
net asset value per share).............................................................. $.77
Offering to Public...................................................................... $14.08
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<PAGE>
<CAPTION>
SMALL CAP GROWTH FUND
---------------------
<S> <C>
Net Assets of A Shares.................................................................. $1,089,036
Outstanding A Shares.................................................................... $107,770
Net Asset Value Per Share
($10.11 DIVIDED BY 94.5%)............................................................... $10.11
Sales Charge, 5.50% of
offering price (5.84% of
net asset value per share).............................................................. $.59
Offering to Public...................................................................... $10.70
<CAPTION>
EQUITY GROWTH FUND
------------------
<S> <C>
Net Assets of A Shares.................................................................. $156,356,127
Outstanding A Shares.................................................................... 6,369,718
Net Asset Value Per Share
($24.55 DIVIDED BY 94.5%)............................................................... $24.55
Sales Charge, 5.50% of
offering price (5.82% of
net asset value per share).............................................................. $1.43
Offering to Public...................................................................... $25.98
<CAPTION>
TAX MANAGED EQUITY FUND
-----------------------
<S> <C>
Net Assets of A Shares.................................................................. $7,348,911
Outstanding A Shares.................................................................... 604,299
Net Asset Value Per Share
($12.16 DIVIDED BY 94.5%)............................................................... $12.16
Sales Charge, 5.50% of
offering price (5.84% of
net asset value per share).............................................................. $.71
-71-
<PAGE>
Offering to Public...................................................................... $12.87
<CAPTION>
CORE EQUITY FUND
----------------
<S> <C>
Net Assets of A Shares.................................................................. $1,731,499
Outstanding A Shares.................................................................... 126,332
Net Asset Value Per Share
($13.71 DIVIDED BY 94.5%)............................................................... $13.71
Sales Charge, 5.50% of
offering price (5.84% of
net asset value per share).............................................................. $.80
Offering to Public...................................................................... $14.51
<CAPTION>
EQUITY INDEX FUND
-----------------
<S> <C>
Net Assets of A Shares.................................................................. $3,892,113
Outstanding A Shares.................................................................... 344,718
Net Asset Value Per Share
($11.29 DIVIDED BY 96.25%).............................................................. $11.29
Sales Charge, 3.75% of
offering price (3.90% of
net asset value per share).............................................................. $.44
Offering to Public...................................................................... $11.73
<CAPTION>
EQUITY INCOME FUND
------------------
<S> <C>
Net Assets of A Shares.................................................................. $11,075,278
Outstanding A Shares.................................................................... 589,558
Net Asset Value Per Share
($18.79 DIVIDED BY 94.5%)............................................................... $18.79
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<PAGE>
Sales Charge, 5.50% of
offering price (5.80% of
net asset value per share).............................................................. $1.09
Offering to Public...................................................................... $19.88
<CAPTION>
BALANCED ALLOCATION FUND
------------------------
<S> <C>
Net Assets of A Shares.................................................................. $1,465,755
Outstanding A Shares.................................................................... 142,171
Net Asset Value Per Share
($10.31 DIVIDED BY 95.25%).............................................................. $10.31
Sales Charge, 4.75% of
offering price (4.75% of
net asset value per share).............................................................. $.51
Offering to Public...................................................................... $10.82
<CAPTION>
TOTAL RETURN ADVANTAGE FUND
---------------------------
<S> <C>
Net Assets of A Shares.................................................................. $4,685,910
Outstanding A Shares.................................................................... 469,625
Net Asset Value Per Share
($9.98 DIVIDED BY 95.25%)............................................................... $9.98
Sales Charge, 4.75% of
offering price (5.01% of
net asset value per share).............................................................. $.50
Offering to Public...................................................................... $10.48
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<PAGE>
<CAPTION>
BOND FUND
---------
<S> <C>
Net Assets of A Shares.................................................................. $2,803,943
Outstanding A Shares.................................................................... 280,950
Net Asset Value Per Share
($9.98 DIVIDED BY 95.25%)............................................................... $9.98
Sales Charge, 4.75% of
offering price (5.01% of
net asset value per share).............................................................. $.50
Offering to Public...................................................................... $10.48
<CAPTION>
INTERMEDIATE BOND FUND
----------------------
<S> <C>
Net Assets of A Shares.................................................................. $5,129,418
Outstanding A Shares.................................................................... 492,519
Net Asset Value Per Share
($10.41 DIVIDED BY 95.25%).............................................................. $10.41
Sales Charge, 4.75% of
offering price (5.00% of
net asset value per share).............................................................. $.52
Offering to Public...................................................................... $10.93
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<CAPTION>
GNMA FUND
---------
<S> <C>
Net Assets of A Shares.................................................................. $1,497,415
Outstanding A Shares.................................................................... $148,223
Net Asset Value Per Share
($10.10 DIVIDED BY 95.25%).............................................................. $10.10
Sales Charge, 4.75% of
offering price (4.95% of
net asset value per share)*............................................................. $.50
Offering to Public...................................................................... $10.60
<CAPTION>
ENHANCED INCOME FUND
--------------------
<S> <C>
Net Assets of A Shares.................................................................. $550,430
Outstanding A Shares.................................................................... 55,120
Net Asset Value Per Share
($9.99 DIVIDED BY 97.25%)............................................................... $9.99
Sales Charge, 2.75% of
offering price (2.80% of
net asset value per share).............................................................. $.28
Offering to Public...................................................................... $10.27
-75-
<PAGE>
<CAPTION>
OHIO TAX EXEMPT BOND FUND
-------------------------
<S> <C>
Net Assets of A shares.................................................................. $4,807,991
Outstanding A shares.................................................................... 437,155
Net Asset Value Per Share
($11.00 DIVIDED BY 97.0%)............................................................... $11.00
Sales Charge, 3.00% of
offering price (3.09% of
net asset value per share).............................................................. $.34
Offering to Public...................................................................... $11.34
<CAPTION>
PENNSYLVANIA MUNICIPAL FUND
---------------------------
<S> <C>
Net Assets of A shares.................................................................. $217,980
Outstanding A shares.................................................................... 20,958
Net Asset Value Per Share
($10.40 DIVIDED BY 97.0%)............................................................... $10.40
Sales Charge, 3.00% of
offering price (3.08% of
net asset value per share).............................................................. $.32
Offering to Public...................................................................... $10.72
<CAPTION>
NATIONAL TAX EXEMPT FUND
------------------------
<S> <C>
Net Assets of A shares.................................................................. $4,205,129
Outstanding A shares.................................................................... 421,712
Net Asset Value Per Share
($9.97 DIVIDED BY 95.25%).............................................................. $9.97
Sales Charge, 4.75% of
offering price (5.02% of
net asset value per share).............................................................. $.50
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<PAGE>
Offering to Public...................................................................... $10.47
</TABLE>
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 Bond 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
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(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 - 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 Municipal 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 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
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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 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
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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 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
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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 MUNICIPAL BOND FUND
As indicated in the Prospectus, the Michigan Municipal 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 Municipal Bond
Fund with respect to any taxable year which qualifies as federal exempt interest
dividends will be the same 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 Municipal Bond Fund expects to qualify as a
regulated investment company and to be relieved of all or substantially all
federal income taxes, depending
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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
Municipal 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
Municipal 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 Bond Fund is not subject to the Ohio personal
income or school district or municipal income taxes in Ohio. The Ohio Tax Exempt
Bond 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.
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,
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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, 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
Kittles Home Furnishing Center since January
1989.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- ------------ ----------------------
<S> <C> <C>
Robert J. Farling Trustee Retired Chairman, 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
2133 Rothbury Road and Dean, Carol Martin Gatton College of
Lexington, KY 40515 Business and Economics, University of
Age 60 Kentucky, since 1981; Director, The Seed
Corporation (restaurant group), since 1990;
Director; Foam Design, Inc., (manufacturer
of industrial and commercial foam products),
since 1993.
Gerald L. Gherlein Trustee Executive Vice-President 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; Division
Oaks, PA 19456 Controller, First Data Corp. from
Age 42 February 1998 to March 1999; Corporate
Controller, FPS Services, a mutual funds
servicing company, from February 1993 to
February 1998; Treasurer, FPS Broker Services,
Inc. from March 1993 to December 1998.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- ------------ ----------------------
<S> <C> <C>
Edward T. Searle Assistant Treasurer Vice President and Assistant Secretary
One Freedom Valley Drive of SEI Investments Mutual Funds Services
Oaks, PA 19456 and SEI Investments Distribution Co.
Age 45 since August 1999; Associate, Drinker
Biddle & Reath LLP (law firm) from June 1998
to August 1999; Associate, Ballard Spahr
Andrews & Ingersoll LLP (law firm) from
September 1995 to June 1998; Student, Temple
University School of Law, from 1992 to 1995.
</TABLE>
- --------------------
*Messrs. Carter and Martens are considered by the Trust to be "interested
persons" of the Trust as defined in the 1940 Act.
As of the date of this Statement of Additional Information, the
trustees of the Trust as a group owned beneficially less than 1% of the
outstanding shares of each of the Funds of the Trust, and less than 1% of the
outstanding shares of all of the Funds of the Trust in the aggregate.
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 Mr. Searle are employed by SEI Investments Mutual Funds
Services, which receives fees as Administrator to the Trust. Mr. Searle 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. The trustees and officers of the Trust own less than 1% of the shares
of the Trust.
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<PAGE>
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, $26,198.80 $0 $0 $35,000
Chairman and Trustee
Leigh Carter, Trustee $22,394.43 $0 $0 $30,000
John F. Durkott, Trustee $22,394.43 $0 $0 $30,000
Robert J. Farling, Trustee $22,394.43 $0 $0 $30,000
Richard W. Furst, Trustee $22,394.43 $0 $0 $30,000
Gerald L. Gherlein, Trustee $22,394.43 $0 $0 $30,000
Herbert R. Martens, Jr., $0 $0 $0 $0
President and Trustee
J. William Pullen, Trustee $22,394.43 $0 $0 $30,000
</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
treated as if they had been invested by the Trust in the shares of one or
more portfolios of the Trust and 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 particular level of compensation.
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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, 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 Bond Fund
under an Advisory Agreement dated
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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. Prior to such dates, National City Bank or an
affiliate served as adviser to the Funds other than the Core Equity Fund.
National Asset Management Corporation ("NAM") serves as investment
sub-adviser to the Core Equity Fund (the "sub-adviser"). 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 National City Bank and its 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) $2,360,071 (after waivers of
$0), $1,989,606 (after waivers of $0) and $982,053 with respect to the Small Cap
Value Fund; (ii) $8,840,432 (after waivers of $0), $2,395,579 (after waivers of
$0), and $1,612,194 with respect to the Equity Growth Fund; and (iii) $3,169,439
(after waivers of $0), $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 $1,723,308, $611,655, $947,557, (after fee waivers of $0,
$0 and $0) 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 $1,302,931 (after fee waivers of $308,130) and $0
(after fee waivers of $173,851). The Equity Index Fund commenced operations on
July 10, 1998, and as of May 31, 1999 paid advisory fees of $0 (after fee
waivers of $503,834). The Mid Cap Growth and Large Cap Ultra Funds have not yet
commenced operations. The Balanced Allocation Fund commenced operations on July
10, 1998. Advisory fees were $422,278 (after fee waivers of $0) for the period
from commencement of operations until May 31, 1999.
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) $1,105,774 (after waivers of $634,144),
$404,823 (after waivers of $1,133,101), and $0 (after waivers of $1,530,963) for
the Total Return Advantage Fund; (ii) $1,057,813 (after waivers of $396,680),
$593,301 (after waivers of $222,488), and $550,261 (after waivers of $118,288)
for the Intermediate Bond Fund; and (iii) $172,808 (after waivers of $173,823)
$65,970, (after waivers of $264,973) and $0 (after waivers of $296,129) for the
Enhanced Income Fund. The Michigan Municipal 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) $3,589,348 (after
waivers of $0), $574,688 (after waivers of $0) and $485,145 (after fee waivers
of $54,417) for the Bond Fund and (ii)
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$491,789 (after waivers of $0), $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) $11,464 and
$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) $924,937 (after waivers of
$1,233,250), $742,324 (after waivers of $989,768) and $573,529 (after waivers of
$764,704), respectively, for the Tax Exempt Money Market Fund; (ii) $8,013,996
(after waivers of $3,205,598), 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) $3,699,448 (after waivers of $1,479,779), $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 $980,380
(after waivers of $196,076), $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 $203,004 (after waivers of $338,340) 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 September 15, 1998. Advisory
fees were $103,978 (after waivers of $157,160) for the period from commencement
of operations until May 31, 1999.
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 $71,985 for the fiscal year ended May 31, 1999 (after waivers
of $1,060,233) $0 for the fiscal year ended May 31, 1998 (after waivers of
$649,247) and $0 for the period from commencement of operations (January 5,
1990) to May 31, 1997 (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
Municipal Bond Fund advisory fees of $78,742 (after waivers of $137,798) 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 Municipal Bond
Fund) until May 31, 1997, National
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City Bank, the then adviser of the Pennsylvania Municipal 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 Municipal 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 Bond Fund advisory fees of $36,100 (after
waivers of $492,594) 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 Bond and Pennsylvania
Municipal Bond Funds was approved by the shareholders of the Funds on
November 19, 1997 and by the sole shareholder of the National Tax Exempt Bond
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
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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.
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 Investment Mutual Fund Services (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.
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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 Trademark-, 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 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: $116,269 (after waivers of $0)
and $8,857 (after waivers of $0) with respect to the International Equity Fund;
$180,236 (after waivers of $0) and $16,100 (after waivers of $0) with respect to
the Small Cap Value Fund; $45,999 (after waivers of $0) and $4,252 (after
waivers of $0) with respect to the Small Cap Growth Fund; $830,212 (after
waivers of $0) and $19,814 with respect to the Equity Growth Fund (after waivers
of $0); $150,366 (after waivers of $0) and $15,886 (after waivers of $0) with
respect to the Tax Managed Equity Fund; $89,073 (after waivers of $0) and $6,096
(after waivers of $0) with respect to the Core Equity Fund; and $295,814 (after
waivers of $0) and $10,576 (after waivers of $0) with respect to the Equity
Income Fund; .
The Equity Index Fund commenced operations on July 10, 1998, and as of
May 31, 1999 paid Administration fees of $100,767.
Prior to May 1, 1998, PFPC served as the administrator and
accounting agent to the Funds other than the Tax Managed Equity and National
Tax Exempt Bond Funds. Pursuant to the former Administration and Accounting
Services Agreement,
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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 $41,193, $223,081, $457,444, $185,117, $62,591 and
$54,342, (after waivers $0, $0, $0, $0, $0 and $0) with respect to the
Balanced Allocation, 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 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 $144,100, $27,560 and $67,288 with respect to the Ohio
Tax Exempt, Pennsylvania Municipal and National Tax Exempt Bond Funds (after
waivers of $0, $0 and $0). For the period from May 1, 1998 (April 9, 1998 in the
case of the National Tax Exempt Bond 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 Bond 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
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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 of 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: $18,799
and $68,101, respectively, and waived fees of $0 and $9,681 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.
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)
$65,115, $79,005 and $37,703 respectively for the Treasury Fund.
For the fiscal year ending May 31, 1999, 1998 and 1997, the
Administrator earned administration fees of $74,228, $94,553, $431,637,
$2,261,919, $1,035,845 and $274,506, (after waivers of $0, $0, $0, $0, $0 and
$0) with respect to the Ohio Municipal Money Market, Pennsylvania Tax Exempt,
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 N/A, $5,562, $29,782, $138,647, $68,244, and $18,670 with respect to
the Ohio Municipal Money Market, Pennsylvania Tax Exempt, Tax Exempt, Money
Market, Government, and Treasury Funds.
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.
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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.
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.
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For the fiscal years ended May 31, 1999, the Trust paid the
Distributor the following approximate amounts under the A and I Shares Plan and
B Shares Plan for its distribution services and shareholder service assistance:
<TABLE>
<CAPTION>
FISCAL YEAR 1999 DISTRIBUTION FEES
PORTFOLIO DISTRIBUTION MARKETING/ TOTAL FEES
SERVICES CONSULTATION
<S> <C> <C> <C>
International Equity Fund $14,752 $34,422 $49,174
Small Cap Value Fund $22,615 $52,768 $75,384
Small Cap Growth $5,934 $13,846 $19,779
Equity Growth Fund $116,102 $270,905 $387,008
Tax Managed Equity Fund $22,924 $53,490 $76,414
Core Equity Fund $11,995 $27,989 $39,985
Equity Index Fund* $9,917 $23,140 $33,058
Equity Income Fund $39,215 $91,501 $130,716
Balanced Allocation Fund $5,415 $12,635 $18,050
Total Return Advantage Fund $0
Bond Fund $61,780 $144,153 $205,933
Intermediate Bond Fund $24,457 $57,066 $81,523
GNMA Fund $7,736 $18,050 $25,786
Enhanced Income Fund $0
Ohio Tax Exempt Bond Fund $18,062 $42,145 $60,207
Pennsylvania Municipal Bond Fund $0
National Tax Exempt Bond Fund $8,586 $20,034 $28,620
Ohio Municipal Money Market Fund $7,689 $17,942 $25,631
Pennsylvania Tax Exempt Money Market $12,011 $28,025 $40,035
Fund
Tax Exempt Money Market Fund $54,340 $126,793 $181,133
Money Market Fund $285,026 $665,060 $950,086
Government Money Market Fund $130,635 $304,814 $435,449
Treasury Money Market Fund $34,243 $79,901 $114,144
Mid Cap Growth Fund N/A
Large Cap Ultra Fund N/A
U.S. Government Income N/A
Fund
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<CAPTION>
PORTFOLIO DISTRIBUTION MARKETING/ TOTAL FEES
SERVICES CONSULTATION
<S> <C> <C> <C>
Michigan Municipal Bond N/A
Fund
Treasury Plus Money Market N/A
Fund
</TABLE>
*The Equity Index Fund commenced operations on July 10, 1998. 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.
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. Each Fund reimburses National City
Bank for its direct and indirect costs and expenses incurred in rendering
custodial services.
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
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to the Board of Trustees concerning the Fund's operations. The Transfer Agent
sends each shareholder of record periodic statements showing the total number of
shares owned as of the last business day of the month (as well as the dividends
paid during the current month and year), and provides each shareholder of record
with a daily transaction report for each day on which a transaction occurs in
the shareholder's account with each Fund.
SHAREHOLDER SERVICES PLANS
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, Mid Cap Growth, U.S. Government
Income and Michigan Municipal 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, Ohio Tax Exempt Bond, Municipal Bond and
National Tax Exempt Bond Funds, 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
$1,102,442, $780,933 and $421,322; $1,271,614, $1,398,444, and $803,733;
$249,890, $86,349 and $102,856; $0, $0 and $0 in brokerage commissions,
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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
$726,464 and $290,141; $503,450 and $51,366; and $0 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 $26,801 and $0 in brokerage commissions. For the period
from commencement of operations (July 10, 1998) to May 31, 1999, the Equity
Index Fund paid brokerage commissions of $93,484. For the period from
commencement of operations (July 10, 1998) to May 31, 1999, the Balanced
Allocation Fund paid brokerage commissions of $33,019. 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 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
Municipal Bond Fund paid $0 and $0 in brokerage commission. For the period from
September 9, 1996 (date of reorganization of the Predecessor fund to the
Pennsylvania Municipal Bond Fund) until May 31, 1997, the Pennsylvania Municipal
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 Municipal 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 Bond Fund paid brokerage commissions
of $0 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
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<PAGE>
respect to such transactions, securities, savings deposits, repurchase
agreements and reverse repurchase agreements.
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.
During the last fiscal year, the following Funds engaged in the
directed brokerage transactions in the following amounts and for the following
commissions: the Equity Growth Fund, $304,941,120 in transactions and $253,608
in commissions; the Small Cap Value Fund, $18,044,068 in transactions and
$76,449 in commissions; the Equity Income Fund, $34,973,766 in transactions and
$45,834 in commissions; the Small Cap Growth Fund, $5,745,685 in transactions
and $24,515 in commissions; the Core Equity Fund, $61,561,884 in transactions
and $33,610 in commissions; the Tax Managed Equity Fund, $7,098,518 in
transactions and $9,917 in commissions; the Equity Index Fund, $86,663,189 in
transactions and $28,093 in commissions; the Balanced Allocation Fund,
$31,999,895 in transactions and $15,515 in commissions; the International Fund,
$3,554,917 in transactions and $7,698 in commissions.
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<PAGE>
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 statements of net
assets, statement of assets and liabilities, statements of operations,
statements of changes in net assets and financial highlights for each of the
Fund's commencement of operations date through May 31, 1999, except for the
financial highlights of the Armada Bond Fund, Armada GNMA Fund, Armada
Pennsylvania Municipal Bond Fund, and Armada Pennsylvania Tax Exempt Money
Market Fund for each Fund's respective commencement of operations date through
May 31, 1996, 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 on their report given on their authority as experts
in accounting and auditing.
The financial highlights for the Armada Bond Fund, Armada GNMA
Fund, Armada Pennsylvania Municipal Bond Fund, and Armada Pennsylvania Tax
Exempt Money Market Fund for each Fund's commencement of operations date
through May 31, 1996, which are incorporated by reference in this Statement of
Additional Information, were audited by Coopers & Lybrand, L.L.P.,
independent accountants, whose report dated July 26, 1996 expressed an
unqualified opinion on such financial highlights, 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, LLP
with offices at 4900 Key Center, 127 Publiz 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:
6
a-b
Yield = 2 [(------) - 1]
cd + 1
Where: a = dividends and interest earned during the period.
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<PAGE>
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 the
period.
The Equity Income, Balanced Allocation, Total Return Advantage,
Bond, Intermediate Bond, GNMA, Enhanced Income, the Tax-Exempt Funds, Mid Cap
Growth and U.S. Government Income Funds calculate interest earned on debt
obligations held in their portfolios by computing the yield to maturity of
each obligation held by it 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 Bond, Pennsylvania Municipal Bond
and National Tax Exempt Bond Funds were: 3.73% and 3.94%; 3.76% and 3.98%;
and 3.56% and 3.85%, respectively. The tax equivalent yields (assuming a
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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 6.99% and 7.38%,
respectively. The tax equivalent yields (assuming a 39.6% federal tax rate
and a 2.8% Pennsylvania tax rate) for the Pennsylvania Municipal Bond Fund's
A and I shares for the same period were 6.53% and 6.91%, respectively. The
tax equivalent yield (assuming a 39.6% federal tax rate) for the National Tax
Exempt Bond Fund's I shares for the same period was 6.37%.
For the 30-day period ended May 31, 1999, the yield of the Class B Shares of
the National Tax Exempt Bond Fund was 3.00%.
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 N/A and
N/A, 2.86% and 3.27%, .33% and .63%, N/A and N/A, .03%, and .67%, N/A and
N/A, 1.48% and 1.77%, 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 5.66% and 6.20%; 5.25% and 5.69%; 5.20%,
and 5.73%; 5.49%, and 6.03%; and 5.18% and 5.44%, 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 4.73% and 4.78%,
respectively.
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<PAGE>
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 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:
1/n
ERV
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 (9.64)% (after taking the sales load into account) and (4.38)%
(without taking into account any sales load), for the Small Cap Value Fund's A
shares, (9.40)% (after taking the sales load into account) and (5.13)% (without
taking into account any sales load) for its B shares and (3.67)% 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 13.23% (after
taking into account the sales load) and 14.57% (without taking into account any
sales load), for its
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A shares, (6.21)% (after taking the sales load into account) and (3.06)%
(without taking into account any sales load) for its B shares, and 15.43% for
the I shares. The Fund commenced operations December 20, 1989.
The average annual total returns for the one year period ending May
31, 1999 were 13.30% (after taking the sales load into account) and 19.88%
(without taking into account any sales load), for the Equity Growth Fund's A
Shares, 14.22% (after taking the sales load into account) and 19.22% (without
taking into account any sales load) for its B shares and 20.16% 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 14.97% (after taking
into account the sales load) and 15.78% (without taking into account any sales
load), for its A shares, 17.66% (after taking the sales load into account) and
20.99% (without taking into account any sales load) for its B shares, and 16.36%
for the I shares. The Fund commenced operations December 20, 1989.
The average annual total returns for the one year period ended May
31, 1999 were 16.24% (after taking the sales load into account) and 23.03%
(without taking into account any sales load), for the Tax Managed Equity
Fund's A shares, 17.31% (after taking the sales load into account) and 22.31%
(without taking into account any sales load) for its B shares and 22.82% for
its I shares. The average annual total returns since the Tax Managed Equity
Fund's commencement of operations through May 31, 1999 were 17.22% (after
taking into account the sales load) and 17.66% (without taking into account
any sales load), for its A shares, 17.63% (after taking the sales load into
account) and 17.63% (without taking into account any sales load) for its B
shares, and 17.65% for the I shares.
The average annual total returns for the one year period ended May
31, 1999 were 18.86% (after taking the sales load into account) and 25.76%
(without taking into account any sales load), for the Core Equity Fund's A
shares, 20.17% (after taking the sales load into account) and 25.17% (without
taking into account any sales load) for its B shares and 26.08% for its I
shares. The average annual total returns since the Core Equity Fund's
commencement of operations through May 31, 1999 were 17.98% (after taking
into account the sales load) and 21.68% (without taking into account any
sales load), for its A shares, 22.88% (after taking the sales load into
account) and 26.16% (without taking into account any sales load) for its B
shares, and 21.94% for the I shares.
The average annual total returns since the Equity Index Fund's
commencement of operations through May 31, 1999 were 32.33% (after taking
into account the sales load) and 39.76% (without taking into account any
sales load), for its A shares, and 15.20% for the I shares. As of May 31,
1999, the Equity Index Fund had been operating for less than one year.
The average annual total returns for the one year period ended May 31,
1999 were 4.32% (after taking the sales load into account) and 10.40% (without
taking into account any sales load), for the Equity Income Fund's A shares,
4.14% (after taking the sales load into account) and 9.14% (without taking into
account any sales load) for its B shares and 10.62% 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 17.24% (after taking into
account the sales load) and 18.64% (without taking into account any sales load),
for its A shares, 10.10% (after taking the sales load into account) and 13.52%
(without taking into account any sales load) for its B shares, and 18.93% for
the I shares. The Fund commenced operatons December 20, 1989.
The average annual total returns since the Balance Allocation
Fund's commencement of operations through May 31, 1999 were 2.55% (after
taking into account the sales load) and 8.71% (without taking into account
any sales load), for its A shares, 1.94% (after taking the sales load into
account) and 11.02% (without taking into account any sales load) for its B
shares, and 5.13% for the I shares. As of May 31, 1999, the Equity Index Fund
had been operating for less than one year.
The average annual total returns for the Total Return Advantage Fund's
fiscal year ended May 31, 1999 were (1.71)% (after taking the sales load into
account) and 3.18% (without taking into account any sales load) for its A
shares, and 3.54% for its I shares. The average annual total returns since the
Total Return Advantage Fund's commencement of May 31, 1999 were 6.15% (after
taking into account the sales load), and 7.25% (without taking into account any
sales load) for its A shares and 7.65% 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 (1.14)% (after taking the sales load into account)
and 3.77% (without taking into account any sales load) for its A shares and,
(1.80)% (after taking the sales load into account) and 3.06% (without taking
into account any sales load) for its B shares and 3.82% for its I shares. The
average annual total returns since the Bond Fund's commencement of operations
through May 31, 1999 were 4.55% (after taking into account the sales load)
and 6.45% (without taking into account any sales load) for its A shares,
(0.15)% (after taking the sales load into account) and 3.28% (without taking
into account any sales load) for its B shares and 6.52% for its I shares. The
Bond Fund commenced operations on August 10, 1994. The A share class of the
Bond Fund commenced operations on September 11, 1996, the B share class of
the Bond Fund commenced operations on January 6, 1998, and the I share class
of the Bond Fund commenced operations on August 10, 1998.
The average annual total returns for the Intermediate Bond Fund's
fiscal year ended May 31, 1999 were (1.38)% (after taking the sales load into
account) and 3.54% (without taking into account any sales load) for its A
shares, (2.07)% (after taking the sales load into account) and 2.83% (without
taking into account any sales load) for its B shares and 3.98% 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 5.95% (after taking into
account the sales load) and 6.59% (without taking into account any sales
load) for its A shares, (0.55)% (after taking the sales load into account)
and 2.92% (without taking into account any sales load) for its B shares, and
7.24% for its I shares. The A share class of the Intermediate Bond Fund
commenced operations on April 15, 1991, the B share class of the Intermediate
Bond Fund commenced operations on January 6, 1998 and the I share class of
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 (1.19)% (after taking the sales load into account) and 3.77%
(without taking into account any sales load) for its A shares and 4.02% for
its I shares. The average annual total returns since the GNMA Fund's
commencement of operations through May 31, 1999 were 5.35% (after taking into
account the sales load) and 7.25% (without taking into account any sales
load) for its A shares and 7.58% for its I shares. The A share class of the
GNMA Fund commenced operations on September 9, 1996 and the I share class of
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 2.01% (after taking the sales load into account)
and 4.94% (without taking into account any sales load) for its A shares and
5.14% for its I shares. The average annual total returns since the Enhanced
Income Fund's commencement of operations through May 31, 1999 were 5.21% (after
taking into account the sales load) and 5.84% (without taking into account any
sales load) for its A shares and 5.91% 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 average annual total returns for the Ohio Tax Exempt Bond Fund for
the one year period ending May 31, 1999 were .84% (after taking into account the
sales load) and 3.93% (without taking into account any sales load) for the A
shares and 3.94% for the I shares. The average annual total returns since the
Fund's commencement of operations through May 31, 1999 were 5.51% (after taking
into account the sales load) and 5.90% (without taking into account any sales
load) for the A shares and 5.83% 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 Municipal Bond Fund were 1.11%, (after taking into
account the sales load) and 4.21% (without taking into
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account any sales load) for the A shares and 4.21% for the I shares. The average
annual total returns since the predecessor fund to the Pennsylvania Municipal
Bond Fund's commencement of operations through May 31, 1999 were 4.53% (after
taking into account the sales load) and 5.70% (without taking into account any
sales load) for the A shares and 5.36% for the I shares. The predecessor fund to
the Pennsylvania Municipal Bond Fund commenced investment operations on August
10, 1994.
The average annual total return since the predecessor fund to the
National Tax Exempt Bond Fund commencement of operations through May 31, 1999
was 7.05% for the I shares. The predecessor fund to the National Tax Exempt Bond
commenced investment operations on July 31, 1984.
The average annual total returns for the International Equity Fund for
the one year period ending May 31, 1999 were (4.70)% (after taking into account
the sales load) and .84% (without taking into account any sales load) for the
Class A Shares, (4.90)% (after taking the sales load into account) and .10%
(without taking into account any sales load) for its Class B Shares and .95% for
the Class I Shares. The average annual total returns since the Fund's
commencement of operations through May 31, 1999 were 1.74% (after taking the
sales load into account) and 4.92% (without taking into account any sales load),
for the Class A shares, 8.15% (after taking the sales load into account) and
11.60% (without taking into account any sales load) for its B shares and 5.24%
for the International Equity Fund's I shares. The A and I share classes of the
International Equity Fund commenced operations on August 1, 1997 and the B share
class of the International Equity Fund commenced operations on January 6, 1998.
The average annual total returns for the Small Cap Growth Fund for the
one year period ending May 31, 1999 were (17.36)% (after taking into account the
sales load) and (12.54)% (without taking into account any sales load) for the
Class A Shares, (17.55)% (after taking the sales load into account) and (13.26)%
(without taking into account any sales load) for its Class B Shares and (12.36)%
for the Class I Shares. The average annual total returns since the Fund's
commencement of operations through May 31, 1999 were (1.73)% (after taking the
sales load into account) and 1.35% (without taking into account any sales load),
for the Class A shares, (7.00)% (after taking the sales load into account) and
(3.56)% (without taking into account any sales load) for its B shares and 1.54%
for the Class I shares. The A and I share classes of the Small Cap Growth Fund
commenced operations on August 1, 1997 and the B share class of the Small Cap
Growth Fund commenced operations on January 6, 1998.
The average annual total returns for the Core Equity Fund for the one
year period ending May 31, 1999 were 18.86% (after taking into account the sales
load) and 25.78% (without taking into account any sales load) for the Class A
Shares, 20.17% (after taking the sales load into account) and 25.17% (without
taking into account any sales load) for its Class B Shares and 26.08% for the
Class I Shares. The average annual total returns since the Fund's commencement
of operations through May 31, 1999 were 17.98% (after taking the sales load into
account), and 21.68% (without taking into account any sales load) for the Core
Equity Fund's A shares, 22.88% (after taking the sales load into account) and
26.16% (without taking into account any sales load) for its B shares and 21.94%
for the Core Equity Fund's I shares. The A and I share classes of the Core
Equity Fund commenced operations on August 1, 1997 and the B share class of the
Core Equity Fund commenced operations on January 6, 1998.
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
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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
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 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,
investment strategies and related matters believed to be of relevance to a Fund.
Each Fund may also include in Materials charts, graphs or drawings
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<PAGE>
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 2.78% and 2.93%, 2.73% and 2.87%, 4.42%
and 4.57%, 4.33% and 4.48%, and 3.96% and 4.11%, respectively, and their
respective effective yields were 2.82% and 2.97%, 2.76% and 2.91%, 4.52% and
4.68%, 4.43% and 4.58%, and 4.03% and 4.19%, respectively. For the seven-day
period ended May 31, 1999, the yield of the B shares of the Money Market Fund
was 3.70%.
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 4.90% and 5.16%, and 4.57% and 4.82%, respectively.
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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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<PAGE>
<TABLE>
<CAPTION>
Aggregate
Total Return
From Aggregate Total
Inception Return From
Through Inception
5/31/99 (with Through 5/31/99
Deduction of (without
Maximum Deduction for
Sales Any Sales Inception
Charge) Charge) Date
------ ------ ----
<S> <C> <C> <C>
Armada International Equity
Fund
Class A 3.21% 9.19% 8/01/97
Class I N/A 9.80% 8/01/97
B Shares 11.57% 16.57% 01/06/98
Armada Small Cap Value Fund
Class A 81.47% 92.00% 08/15/94
Class I N/A 100.58% 07/26/94
B Shares -8.57% -4.26% 01/06/98
Armada Small Cap Growth Fund
Class A -3.14% 2.48% 8/01/97
Class I N/A 2.85% 8/01/97
B Shares -9.64% 4.94% 01/06/98
Armada Equity Growth Fund
Class A 210.04% 228.06% 4/15/91
Class I N/A 318.50% 12/20/89
B Shares 25.51% 30.51% 01/06/98
Armada Tax Managed Equity Fund*
Class A 971.75% 1033.58% 5/11/98
Class I 1031.70% N/A 4/9/98
B Shares 1027.03% 1027.03% 5/4/98
Armada Core Equity Fund
Class A 35.35% 43.20% 8/01/97
Class I N/A 43.77% 8/01/97
B Shares 33.36% 38.36% 01/06/98
Armada Equity Index Fund
Class A 20.20% 24.83% 10/15/99
Class I 14.16% N/A 7/10/98
B Shares N/A N/A
Armada Equity Income Fund
Class A 113.69% 126.18% 8/22/94
Class I N/A 134.59% 07/01/94
B Shares 14.39% 19.39% 01/06/98
Armada Balanced Allocation
Fund 2.12% 7.26% 7/31/98
Class A N/A 4.57% 7/10/98
Class I 1.07% 6.07% 11/11/98
B Shares
Armada Total Return Advantage
Fund
Class A
Class I 32.63% 39.29% 09/06/94
B Shares N/A 43.53% 07/07/94
N/A N/A 08/16/99
</TABLE>
*Includes the history of a predecessor common trust fund which commenced
operations June 30, 1984.
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<PAGE>
<TABLE>
<CAPTION>
Aggregate
Total Return
From Aggregate Total
Inception Return From
Through Inception
5/31/99 (with Through 5/31/99
Deduction of (without
Maximum Deduction for
Sales Any Sales Inception
Charge) Charge) Date
------ ------ ----
<S> <C> <C> <C>
Armada Bond Fund
Class A 12.87% 18.53% 09/11/96
Class I N/A 35.50% 08/10/94
B Shares -0.20% 4.61% 01/06/98
Armada Intermediate Bond Fund
Class A 59.79% 67.83% 04/15/91
Class I N/A 93.55% 12/20/89
B Shares -0.76% 4.10% 1/06/98
Armada GNMA Fund
Class A 15.21% 20.96% 9/11/96
Class I N/A 42.12% 8/10/94
B Shares N/A N/A 8/16/99
Armada Enhanced Income Fund
Class A 27.12% 30.77% 09/09/94
Class I N/A 32.48% 07/07/94
B Shares N/A N/A 08/16/99
Armada Ohio Tax Exempt Bond
Fund
Class A 54.48% 59.21% 04/15/91
Class I N/A 70.37% 01/05/90
B Shares N/A N/A
Armada Pennsylvania Municipal
Bond Fund
Class A 12.80% 16.26% 09/11/96
Class I N/A 28.52% 08/10/94
B Shares N/A N/A
Armada National Tax Exempt Bond Fund*
Class A 161.72% 174.72% 06/22/98
Class I 174.82% N/A 04/09/98
B Shares 174.23% 174.23% 01/28/99
Armada Balanced Allocation Fund
Class A 2.12% 7.26% 07/31/98
Class I 4.57% N/A 07/10/98
B Shares 1.07% 6.07% 11/11/98
</TABLE>
*Includes the history of a predecessor common trust fund which commenced
operations July 31, 1994.
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
ending value and by dividing the remainder by the beginning value. The Fund does
not, for these purposes, deduct from the initial
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<PAGE>
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 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
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<PAGE>
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 August 31, 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 Money Market, Treasury Money Market, Tax Exempt Money
Market and Pennsylvania Tax Exempt Money Market Funds acting as agent or
custodian for their customers, but did not own such shares beneficially:
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
I SHARES
Pennsylvania
Tax Tax Ohio
Exempt Government Exempt Treasury Municipal
Money Money Money Money Money Money
Market Market Market Market Market Market
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
National City Bank, Northeast N/A N/A N/A 12.88% N/A 17.92%
One Cascade Plaza
Akron, OH 44308
National City Bank of Dayton N/A N/A N/A N/A N/A 22.19%
Gem Plaza, 6 N. Main
Dayton, OH 45412
National Bank of Columbus N/A 10.38% 16.15% 15.00% N/A 8.18%
155 East Broad Street
Columbus, OH 43251
National City Bank of Kentucky N/A 34.38% 20.57% 5.29% 11.67% N/A
National City Tower
101 South Fifth Street
Louisville, KY 40202
National City Bank of Indiana N/A 13.03% 24.08% 29.56% 11.88% N/A
101 W. Washington Street
Indianapolis, IN 46255
National City Bank, Northwest N/A N/A N/A N/A N/A N/A
405 Madison Avenue
Toledo, OH 43603
National City Bank of Pennsylvania 98.85% 9.64% N/A 7.80% 12.46% N/A
400 Fourth Avenue
Pittsburgh, PA 15222
National City Trust Co. N/A N/A N/A N/A N/A N/A
1401 Forum Way, Suite 503
West Palm Beach, FL 33401
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<PAGE>
<CAPTION>
Pennsylvania
Tax Tax Ohio
Exempt Government Exempt Treasury Municipal
Money Money Money Money Money Money
Market Market Market Market Market Market
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
National City Bank, Cleveland N/A 25.71% 26.18% 23.64% 39.68% 43.33%
1900 East Ninth Street
Cleveland, OH 44114
</TABLE>
As of September 23, 1999, the following bank subsidiaries of National
City Corporation held of record 5% or more of the outstanding I shares of the
Core Equity, Small Cap Growth, International Equity, Equity Growth, Intermediate
Bond and Ohio Tax Exempt Bond Funds acting as agent or custodian for their
customers, but did not own such shares beneficially:
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
I SHARES
Ohio
Inter- Inter- Tax
Small Cap national Equity mediate Exempt
Core Equity Growth Equity Growth Bond Bond
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
National City Bank, Northeast N/A 6.41% N/A 6.59% 10.89% 11.33%
One Cascade Plaza
Akron, OH 44308
National City Bank of Dayton N/A N/A N/A N/A N/A 10.26%
Gem Plaza, 6 N. Main
Dayton, OH 45412
National Bank of Columbus N/A 7.84% 12.97% 5.86% 12.73% 15.56%
155 East Broad Street
Columbus, OH 43251
National City Bank of Kentucky N/A N/A N/A 9.50% N/A N/A
National City Tower
101 South Fifth Street
Louisville, KY 40202
National City Bank of Indiana N/A N/A N/A 10.96% 31.16% N/A
101 W. Washington Street
Indianapolis, IN 46255
National City Bank, Northwest N/A N/A N/A 6.85% N/A 27.09%
405 Madison Avenue
Toledo, OH 43603
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<PAGE>
<CAPTION>
Ohio
Inter- Inter- Tax
Small Cap national Equity mediate Exempt
Core Equity Growth Equity Growth Bond Bond
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
National City Bank of Pennsylvania N/A 24.31% 11.51% 6.19% N/A N/A
400 Fourth Avenue
Pittsburgh, PA 15222
National City Trust Co. N/A N/A N/A N/A N/A 5.93%
1401 Forum Way, Suite 503
West Palm Beach, FL 33401
National City Bank, Cleveland 93.56% 41.34% 53.18% 47.01% 16.43% 28.35%
1900 East Ninth Street
Cleveland, OH 44114
National City Bank, N/A 7.62% N/A N/A N/A N/A
Michigan/Illinois
</TABLE>
As of September 23, 1999, the following bank subsidiaries of National
City Corporation held of record 5% or more of the outstanding I shares of the
Enhanced Income, Total Return Advantage, Small Cap Value, Equity Income, Bond
and GNMA Funds acting as agent or custodian for their customers, but did not own
such shares beneficially:
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
I SHARES
Small
Enhanced Total Return Cap Equity
Income Advantage Value Income Bond GNMA
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
National City Bank, Northeast 8.35% 8.38% 5.19% N/A 7.01% 5.62%
One Cascade Plaza
Akron, OH 44308
National City Bank of Dayton N/A N/A N/A N/A N/A N/A
Gem Plaza, 6 N. Main
Dayton, OH 45412
National Bank of Columbus N/A N/A 8.52% N/A N/A N/A
155 East Broad Street
Columbus, OH 43251
National City Bank of Kentucky 52.86% 59.70% N/A 16.39% 15.09% N/A
National City Tower
101 South Fifth Street
Louisville, KY 40202
-117-
<PAGE>
<CAPTION>
Small
Enhanced Total Return Cap Equity
Income Advantage Value Income Bond GNMA
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
National City Bank of Indiana N/A N/A N/A 17.87% 8.40% N/A
101 W. Washington Street
Indianapolis, IN 46255
National City Bank, Northwest N/A 9.76% N/A 9.22% N/A N/A
405 Madison Avenue
Toledo, OH 43603
National City Bank of Pennsylvania 10.72% N/A 11.24% 7.56% 14.24% 59.93%
400 Fourth Avenue
Pittsburgh, PA 15222
National City Trust Co. N/A N/A N/A N/A N/A N/A
1401 Forum Way, Suite 503
West Palm Beach, FL 33401
National City Bank, Cleveland 6.40% 12.04% 47.16% 33.88% 39.90% 16.97%
1900 East Ninth Street
Cleveland, OH 44114
National City Bank, 5.49% N/A 10.29% N/A N/A N/A
Michigan/Illinois
</TABLE>
-118-
<PAGE>
As of September 23, 1999, the following bank subsidiaries of National
City Corporation held of record 5% or more of the outstanding I shares of the
Pennsylvania Municipal Bond, Tax Managed Equity, National Tax Exempt, Equity
Index and Balanced Allocation Funds acting as agent or custodian for their
customers, but did not own such shares beneficially:
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
I SHARES
Pennsylvania National
Municipal Tax Managed Tax Equity Balanced
Bond Equity Exempt Index Allocation
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
National City Bank, Northeast N/A 19.26% N/A 5.32% 6.62%
One Cascade Plaza
Akron, OH 44308
National City Bank of Dayton N/A 19.19% N/A N/A N/A
Gem Plaza, 6 N. Main
Dayton, OH 45412
National Bank of Columbus N/A N/A N/A N/A N/A
155 East Broad Street
Columbus, OH 43251
National City Bank of Kentucky N/A N/A N/A N/A N/A
National City Tower
101 South Fifth Street
Louisville, KY 40202
National City Bank of Indiana N/A 27.87% 67.88% N/A N/A
101 W. Washington Street
Indianapolis, IN 46255
National City Bank, Northwest N/A N/A N/A N/A 23.16%
405 Madison Avenue
Toledo, OH 43603
National City Bank of Pennsylvania 96.85% N/A N/A N/A 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 28.92% 16.50% 56.12% 44.62%
1900 East Ninth Street
Cleveland, OH 44114
National City Bank, N/A N/A N/A 34.68% 19.84%
Michigan/Illinois
</TABLE>
-119-
<PAGE>
As of August 31, 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)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Second National Bank TTEE 7,627.9540 6.48%
FBO Thomas Crago
Keogh Profit Sharing Plan
108 Main Ave. SW
Warren, OH 44481-1058
<CAPTION>
INTERNATIONAL EQUITY FUND (B)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Shore West Construction 401(k) Plan 381.9540 6.21%
Kenneth M. Sokol
Attn: Barbara Beyer
23826 Lorain Road
North Olmsted, OH 44070-2226
Shore West Construction 401(k) Plan 810.0220 13.17%
Mark A. Giel
Attn: Barbara Beyer
Personal and Confidential
23826 Lorain Road
North Olmsted, OH 44070-2226
Shore West Construction 401(k) Plan 414.9140 6.75%
Audrey M. Sokol
Attn: Barbara Beyer
Personal and Confidential
23826 Lorain Road
North Olmsted, OH 44070-2226
First Clearing Corporation 1,518.9220 24.69%
A/C 4499-9888
Dale I. Isenberg IRA
WFS as Custodian
1190 Parkside Dr.
Limestone, NY 14753-9704
First Clearing Corporation 313.0420 5.09%
A/C 1945-3182
Kay Marlene Burkette IRA
WFS as Custodian
1725 Kenneth Ave.
Arnold, PA 15068-4220
-120-
<PAGE>
First Clearing Corporation 1,101.3470 17.90%
A/C 2124-6203
Paul C. Carver IRA
WFS as Custodian
314 Concord Circle Rd
Beaver Falls, PA 15010-8516
First Clearing Corporation 442.870 7.20%
A/C 7062-5091
Mary C. Roberts IRA
WFS as Custodian
12107 Southeastern Ave.
Acton, IN 46259-1140
<CAPTION>
INTERNATIONAL EQUITY FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
KeyTrust Co. TTEE FBO 1,168,102.7200 5.94%
Foundation Balanced Fund
A/C 04 66 300
P.O. Box 94871
Cleveland, OH 44101-4871
Sheldon & Co. TTEE 5,968.936.1990 30.36%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 10,714,470.7330 54.49%
c/o Sheldon & Co.
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
SMALL CAP VALUE FUND (A)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Corelink Financial, Inc. 118,406.9710 13.80%
P.O. Box 4045
Concord, CA 94524-4054
-121-
<PAGE>
<CAPTION>
SMALL CAP VALUE FUND (B)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
First Clearing Corporation 2,891.8160 6.45
A/C 5072-0540
Judith E. Lewis IRA R/O
WFS as Custodian
1800 W. Wallings Rd.
Broadview Hts., OH 44147-1137
<CAPTION>
SMALL CAP VALUE FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co. (Reinv) 5,792,311.9360 29.19%
Attn: Trust Mutual Funds
Account No. 10023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 6,383,707.400 32.17%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. (Cash/Reinv) 2,213,448.8130 11.15%
C/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
-122-
<PAGE>
National City Bank, Whitelaw & Co. 2,393,689.4590 12.06%
Daily Valuation Account
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
<CAPTION>
SMALL CAP GROWTH FUND (A)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Second National Bank TTEE 7,627.9540 6.48%
FBO Thomas Crago
Keogh Profit Sharing Plan
108 Main Ave. SW
Warren, OH 44481-1058
Capital Network Services 5,924.7180 5.04%
Attn: Reconciliation Dept.
One Bush Streeet, Suite 1150
San Francisco, CA 94104-4425
<CAPTION>
SMALL CAP GROWTH FUND (B)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
First Clearing Corporation 3,234.7500 19.51%
A/C 3226-1441
Catherine E. Fisher DCDNT IRA
FBO John Clarance Fisher
527 Beecher St.
Louisville, KY 40215-2803
First Clearing Corporation 1,157.2660 6.98%
A/C 4421-4137
William S. Irwin and
Joan A. Irwin
4008 Kurtz Ave.
Louisville, KY 40229-1136
First Clearing Corporation 5,235.6020 31.58%
A/C 5732-8021
Keith A. Monnett IRA
WFS as Custodian
716 Castleton Dr.
Greencastle, IN 46135-1104
First Clearing Corporation 1,158.9220 6.99%
A/C 3957-2081
Nick Hardie &
Shirley Hardie JT Ten
1333 West 32nd SE
Holland, MI 49423-6780
-123-
<PAGE>
First Clearing Corporation 1,782.5310 10.75%
A/C 8349-0905
Virgil C. Thorson and
Marlys M. Thorson
6125 Waterside Dr.
Fort Wayne, IN 46814-3267
<CAPTION>
SMALL CAP GROWTH FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co. (Reinv) 576,873.3490 7.23%
Attn: Trust Mutual Funds
Account #10023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 3,352,371.6420 42.01%
c/o National City Bank
Trust Mutual FDS
P.O. Box 94984
Cleveland, OH 44101-4984
<CAPTION>
EQUITY GROWTH FUND (A)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
State Street Bank & Trust TTEE 4,989,491.2750 78.51%
FBO First Energy Corp.
Savings Plan
DTD 7/1/98
105 Rosemont Ave. WES/IN
Westwood, MA 02090
-124-
<PAGE>
<CAPTION>
EQUITY GROWTH FUND (B)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
First Clearing Corporation 6,925.7410 9.51%
A/C 4815-5374
Ernest Kline IRA
WFS as Custodian
12 Deerfield Lane
Beechwood, OH 44122-7502
<CAPTION>
EQUITY GROWTH FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Whitelaw & Co. 13,863,619.8940 28.14%
Daily Valuation Acct.
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 13,056,078. 26.51%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 6,541,914.9580 13.28%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. (Cash/Reinv) 12,879,717.4360 26.15%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
TAX MANAGED EQUITY FUND (A)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
First Clearing Corporation 52,528.0920 6.12%
A/C 7100-2062
Ann Ruhlin-Levine Rev. Trust
Ann Ruhlin-Levine TTEE
22 Hemlock Dr.
Grand Island, NY 14072-3315
-125-
<PAGE>
National Financial Services Corp. 79,845.8760 9.31%
FBO Allison Vanharesveldt
A/C #241-257923
200 Liberty Street, Floor 5
New York, NY 10281-5500
First Clearing Corporation 44,945.7010 5.24%
A/C 7100-2323
Lynn Ruhlin-Foster Rev Trust
Lynn Ruhlin-Foster TTEE
9965 High Falls Pointe
Alpharetta, GA 30022-8018
<CAPTION>
TAX MANAGED EQUITY FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co., TTEE 9,405,172.9380 48.78%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co., TTEE 9,570,990.3520 49.63%
c/o National City Bank
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
<CAPTION>
CORE EQUITY FUND (A)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Harrel Builders Supply Co., Inc. PS PL 11,187.6850 6.83%
George W. Harrel
Attn: Tracey Harrel, Jr.
Personal and Confidential
100 E. LaFayette Street
Winfield, LA 71483-3280
-126-
<PAGE>
<CAPTION>
CORE EQUITY FUND (B)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
First Clearing Corporation 3,852.0800 5.29%
A/C 2112-6126
Darlene S. Conder IRA
WFS as Custodian
9910 Lakewood Dr.
Louisville, KY 40272-2712
<CAPTION>
CORE EQUITY FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co. 10,028,111.0590 94.23%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
EQUITY INDEX FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Whitelaw & Co. 9,343,978.2370 37.64%
Daily Valuation Account
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. (Reinv) 5,131,711.1170 20.67%
Attn: Trust Mutual Funds
Account # 10023342
P.O. Box 94777
Cleveland, OH 44101-4777
Whitelaw & Co. - Voyage 1,355,666.2620 5.46%
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
-127-
<PAGE>
National City Bank of Michigan/Illinois 5,920,561.2210 23.85%
Attn: Mutual Funds
P.O. Box 4042
Kalamazoo, MI 49003-4042
National City Bank of Michigan/Illinois 2,015,839.8650 8.12%
Attn: Mutual Funds
P.O. Box 4042
Kalamazoo, MI 49003-4042
<CAPTION>
EQUITY INCOME FUND (A)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
National Financial Services Corp. 60,804.7010 9.46%
For the Exclus. Ben. of our Customer
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Hammond Hardware, Inc. 41,271.6450 9.61%
P/S Plan
Attn: John Hammond
Personal and Confidential
P.O. Box 7
Jackson, MI 49204-0007
<CAPTION>
EQUITY INCOME FUND (B)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
First Clearing Corporation 3,856.1230 6.42%
A/C 5072-0540
Judith E. Lewis IRA R/O
WFS as Custodian
1800 W. Wallings Rd.
Broadview Hts., OH 44147-1137
<CAPTION>
EQUITY INCOME FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co. (Reinv) 8,061,401.6430 27.21%
Attn: Trust Mutual Funds
Account #1023342
P.O. Box 94777
Cleveland, OH 44101-4777
-128-
<PAGE>
Sheldon & Co. 4,478,083.4710 15.11%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. (Cash/Reinv) 13,849,205.1280 46.74%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
BALANCED ALLOCATION FUND (A)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Merkle-Knipprath Nursing Home PSP 34,365.2470 18.67%
Omnibus Holding Account
P.O. Box 8705
Boston, MA 02266-8705
First Clearing Corporation 26,497.7910 14.40%
A/C 6995-3098
Steven R. Schlater
Marlene L. Schlater
9900 Klipstine Road
Versailles, OH 45380-9584
-129-
<PAGE>
<CAPTION>
BALANCED ALLOCATION FUND (B)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
First Clearing Corporation 1,968.0560 5.04%
A/C 1427-9962
H. Wayne Bean & Melanie K. Bean
JTTEUC
103 Sugar Pine Pl
First Clearing Corporation 5,804.4840 14.86%
A/C 4892-6313
Willy P. Kutschke
RR 3 Box 140
Sugar Grove, PA 16350-9113
First Clearing Corporation 3,257.0430 8.34%
A/C 5159-5306
Wayne W. Loomis & Lois S. Loomis
4 Pleasant Drive
Youngsville, PA 16371-9643
First Clearing Corporation 3,269.9990 8.37%
A/C 7477-1439
Barbara A. Stanford &
Herbert L. Stanford
104 Main Street
North Warren, PA 16365-4618
First Clearing Corporation 3,358.9250 8.60%
A/C 2135-7612
Wanda Cassell IRA
WFS AS Custodian
3310 Teakwood Circle
Louisville, KY 40216-3107
First Clearing Corporation 2,339.4070 5.99%
A/C 5095-4553
Judy L. Limbrick IRA
WFS AS Custodian
2315 Fluhrs Lane
Louisville, KY 40216-1419
First Clearing Corporation 3,508.2930 8.98%
A/C 3607-7352
Mary M. Goodman
710 West Washington Street
Bradford, PA 16701-2631
-130-
<PAGE>
<CAPTION>
BALANCED ALLOCATION FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co. (Reinv) 2,979,227.8590 42.81%
Attn: Trust Mutual Funds
Account #10023342
P.O. Box 94777
Cleveland, OH 44101-4777
Whitelaw & Co. 2,500,722.0550 35.94%
Daily Valuation Acct.
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
National City Bank of Michigan/Illinois 1,369,267.5310 19.68%
Attn: Mutual Funds
P.O. Box 4042
Kalamazoo, MI 49003-4042
<CAPTION>
TOTAL RETURN ADVANTAGE FUND (A)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Fifth Third Bank 181,913.5130 30.24%
TTEE IBEW 688 RET SA
P.O. Box 630074
Cincinnati, OH 45263-0001
Fifth Third Bank TTEE 185,049.9030 30.76%
FBO IBEW 688 Pension
52-2-7034515
P.O. Box 630074
Cincinnati, OH 45263-0001
Capinco 122,826.7220 20.41%
c/o Firstar East
P.O. Box 1787
Milwaukee, WI 53201-1787
-131-
<PAGE>
<CAPTION>
TOTAL RETURN ADVANTAGE FUND (B)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
SEI Investments Co. 10.3040 100.00%
Attn: Rob Silverstri
One Freedom Valley Drive
Oaks, PA 19456
<CAPTION>
TOTAL RETURN ADVANTAGE FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co. (Reinv) 19,145,869.2070 55.69%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. 7,144,070.6540 20.78%
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 6,535,024.9620 19.01%
C/o National City Bank
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
-132-
<PAGE>
<CAPTION>
BOND FUND (A)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
AASL Trust Company FSB 34,079.3890 9.73%
FBO Harold W. Broun Irrev. Tr.
U/A DTD 8/31/79
Attn: Cheryl Klein
P.O. Box 2977
Milwaukee, WI 53202
First Clearing Corporation 46,334,8050 13.22%
A/C 1302-8189
Baldwin & Sours PSP & TR
Thomas Sours TTEE
5263 Trabue Road
Columbus, OH 43228-9564
<CAPTION>
BOND FUND (B)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
First Clearing Corporation 4,130.0270 5.62%
A/C 4499-9888
Dale I Isenberg IRA
WFS as Custodian
1190 Parkside Drive
Limestone, NY 14753-9704
First Clearing Corporation 3,745.9260 5.10%
A/C 7786-3557
Charles D. Thompson IRA
WFS as Custodian
4604 Dannywood Road
Louisville, KY 40220-1053
First Clearing Corporation 4,734.3920 6.45%
A/C 6242-7306
James M. Pearl IRA
WFS as Custodian
3130 Kaye Lawn Drive
Louisville, KY 40220-2713
First Clearing Corporation 14,773.0390 20.12%
A/C 2065-0386
Carborundum Grinding Wheel Co.
Savings Plan
1011 E. Front Street
P.O. Box 759
-133-
<PAGE>
First Clearing Corporation 4,070.3360 5.45%
A/C 5610-2760
Judy A. Messett
Judy A. Messett
1855 Farrell Terrace
Farrell, PA 16121-1332
First Clearing Corporation 3,862.1780 5.26%
A/C 5717-0934
Joseph D. Masso
4155 West 144th
Cleveland, OH 44135-2053
<CAPTION>
BOND FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co. 8,280,044.4180 11.17%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 11,596,384.7050 15.65%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Whitelaw & Co. 10,773,832.8450 14.54%
Daily Valuation Acct.
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. (Cash/Reinv) 42,100,776.7390 56.80%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
INTERMEDIATE BOND FUND (A)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
-134-
<PAGE>
Mertru & Co. 30,637.8570 5.60%
c/o American National Trust and Investment
Management Co.
FBO Myrtle Dulin
320 S. High Street
Muncie, IN 47305-2325
National Financial Services Corp. 90,544.0310 16.54%
For the Exclus Ben of our Customer
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
<CAPTION>
INTERMEDIATE BOND FUND (B)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
First Clearing Corporation 4,789.1380 9.13%
A/C 7786-3557
Charles D. Thompson IRA
WFS as Custodian
4604 Dannywood Road
Louisville, KY 40220-1053
First Clearing Corporation 2,894.7670 5.52%
A/C 7822-5634
Janet Sadecky IRA
WFS as Custodian
145 Illinois Drive
Lower Burrell, PA 15068-3022
First Clearing Corporation 4,111.5290 7.84%
A/C 3167-9506
Robert Fello Sr. IRA
WFS as Custodian
216 Holmes Street
Vandergrift, PA 15690-1621
-135-
<PAGE>
First Clearing Corporation 3,371.2530 6.43%
A/C 7005-7606
Robert L. Robinson IRA
WFS as Custodian
6107 Diablo Ct.
Louisville, KY 40219-5236
First Clearing Corporation 3,185.5130 6.07%
A/C 2124-6203
Paul C. Carver IRA
WFS as Custodian
314 Concord Circle Road
Beaver Falls, PA 15010-8516
First Clearing Corporation 5,829.5230 11.11%
A/C 6581-8618
Marie A. Pace IRA
WFS as Custodian
305 Irvine Road
Lexington, KY 40502-1817
<CAPTION>
INTERMEDIATE BOND FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co. (Reinv) 4,121,338.4240 13.92%
Attn: Trust Mutual Funds
Account #10023342
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. 7,564,423.3240 25.55%
P.O. Box 94984
Attn: Trust Mutual Funds
Cleveland, OH 44101-4984
Sheldon & Co. 12,585,597.4500 42.51%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
SEI Trust Company 3,857,708.4560 13.03%
Attn: Mutual Fund Administrator
One Freedom Valley Drive
Oaks, PA 19456
<CAPTION>
GNMA FUND (A)
-136-
<PAGE>
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Schweizer Dipple Inc. 8,367.0160 5.46%
401(k) Plan
Dennis J. Clark, Sr.
Attn: Lynn E. Ulrich
Personal and Confidential
7227 Division Street
Oakwood Village, OH 44146-5405
First Clearing Corporation 16,711.5740 10.90%
A/C 3751-8871
Gun Plain Charter Township
C/O Joan Burnell
660 Miller Road
Plainwell, MI 49080-9538
<CAPTION>
GNMA FUND (B)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
SEI Investments Co. 10.2680 100.00%
Attn: Rob Silverstri
One Freedom Valley Drive
Oaks, PA 19456
<CAPTION>
GNMA FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co. 821,283.5820 8.31%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 7,393,960.3630 74.78%
c/o National City Bank
Trust Mutual FDS
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 1,207,824.7000 12.22%
c/o Sheldon & Co.
Trust Mutual FDS
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
ENHANCED INCOME FUND (A)
-137-
<PAGE>
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Shore West Construction 401(k) Plan 3,986.1030 6.76%
Gary Scothon
Attn: Barbara Beyer
Personal and Confidential
23826 Lorain Road
North Olmsted, OH 44070-2226
First Clearing Corporation 19,285.5810 32.73%
A/C 1882-1036
Harvey M. Brunner, Jr. IRA
WFS as Custodian
700 Brick Mill Run, Apt. 106
Westlake, OH 44145-1655
First Clearing Corporation 4,229.0000 7.18%
A/C 8506-3444
Arthur A. Winkel IRA R/O
WFS as Custodian
47935 Hanford
Canton, MI 48187-5421
<CAPTION>
ENHANCED INCOME FUND (B)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
SEI Investments Co. 10.1240 100.00%
Attn: Rob Silvestri
One Freedom Valley Drive
Oaks, PA 19456
<CAPTION>
ENHANCED INCOME FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Key Trust Company 427,187.5060 5.23%
FBO St. Luke's Self Ins.
Short-Term #32468406
P.O. Box 94871
Cleveland, OH 44101-4871
-138-
<PAGE>
Sheldon & Co. (Reinv) 3,584,881.1600 43.92%
Future Quest
c/o National City Bank
Attn: Trust Mutual Funds/01-999999774
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 3,216,295.2930 39.40%
Future Quest
c/o National City Bank
Attn: Trust Mutual Funds/01-999999774
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. TTEE 509,576.6030 6.24%
Future Quest - c/o National City Bank
Trust Mutual Funds/01-999999774
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
OHIO MUNICIPAL MONEY MARKET FUND (A
SHARES)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
National City Bank 14,897,805.2800 67.75%
FBO PCG/Retail Sweep Customer
770 W. Broad Street LOC 16-0347
Columbus, OH 43222-1419
First Clearing Corporation 2,087,055.5200 9.49%
A/C 7655-6279
Stephen Sweetnich
Christine Sweetnich
10114 Highland Drive
Brecksville, OH 44141-3327
First Clearing Corporation 2,009,086.7700 9.14%
A/C 2144-7718
Timothy Scott Couch
c/o IAI
1360 East 9th Street #100
Cleveland, OH 44114-1730
First Clearing Corporation 1,149,827.0800 5.23%
A/C 1750-2503
Edward B. Brandon &
Phyllis P. Brandon JTWROS
Lakepoint Office Park Ste. 470
3201 Enterprise Pkwy.
-139-
<PAGE>
<CAPTION>
OHIO MUNICIPAL MONEY MARKET (I SHARES)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
National City Bank 26,977,468.9400 21.52%
Trust Operations
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 8,621,017.4000 6.88%
Trust Operations
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 56,779,538.1200 45.29%
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 22,567,792.3000 18.00%
Trust Operations
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
<CAPTION>
OHIO TAX EXEMPT BOND FUND (A SHARES)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Evern Securities 28,219.4520 5.31%
c/o BNY Clearing Services Cust.
FBO FFC Ellen Stirn Mavec
S/D IRAUA
A/C 0L58-4485-3981
111 East Kilbourn Avenue
Milwaukee, WI 53202-6611
Mrs. Betty Jean Ross 26,597.5060 5.00%
1160 Sand Run Road
Akron, OH 44313-8014
-140-
<PAGE>
First Clearing Corporation 94,818,6560 17.83%
A/C 1528-5380
David J. Beverly &
Pamela C. Beverly
1128 Laguna Drive
Huron, OH 44839-2605
First Clearing Corporation 49,700.4190 9.34%
A/C 1750-2503
Edward B. Brandon &
Phyllis P. Brandon JTWROS
Lakepoint Office Park Ste. 470
3201 Enterprise Pkwy.
<CAPTION>
OHIO TAX EXEMPT FUND (I SHARES)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon and Co. (Cash) 16,075,385.2230 88.46%
National City Bank
Trust Mutual Funds - 5312
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon and Co. (Cash/Reinv) 1,522,181.7630 8.38%
National City Bank
Trust Mutual Funds-5312
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
PA MUNICIPAL FUND (A SHARES)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Robert H. Rhone 1,201.1810 6.12%
c/o Michael Rhone
P.O. Box 175
Rew, PA 16744-0175
Helen M. Weyer 5.921.1750 30.19%
James N. Weyer, Jr. JTTEN
2600 Mohawk Drive
White Oak, PA 15131-3121
First Clearing Corporation 8,573.7280 43.15%
A/C 7618-3716
Helga A. Suhr
304 Michigan Avenue
Lower Burrell, PA 15068-2936
-141-
<PAGE>
First Clearing Corporation 2,287.2830 11.66%
A/C 4267-7452
John M. Hankey
2430 Renton Road
Pittsburgh, PA 15239-1227
<CAPTION>
PA MUNICIPAL FUND (I SHARES)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co. 3,684,951.0710 96.42%
P.O. Box 94984
Attn: Trust Mutual Funds
Cleveland, OH 44101-4984
<CAPTION>
NATIONAL TAX EXEMPT FUND (A SHARES)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
First Clearing Corporation 340,519.2940 76.14%
A/C 1143-7442
Bill Anest
400 S. Curran
Grayslake, IL 60030-9784
<CAPTION>
NATIONAL TAX EXEMPT FUND (B SHARES)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Wheat, First Securities, Inc. 4,490.7080 14.95%
A/C 2099-9089
James E. Chenault &
Judith E. Chenault
8609 Cool Brook Ct.
Louisville, KY 40291-1501
First Clearing Corporation 5,239.1660 17.45%
A/C 7220-3519
Emory G. Simmons
717 Thornwood Road
Crawfordsville, IN 47933-2760
First Clearing Corporation 5,101.4200 16.99%
A/C 6708-7889
Dorothy K. Riley TTEE
Dorothy and Lester Riley Trust
5 Locust HL
Crawfordsville, IN 47933-3347
-142-
<PAGE>
First Clearing Corporation 5,033.7220 16.76%
A/C 5482-0768
Theodore R. McDonald &
Rose Ann McDonald
7712 St. Bernard Ct.
Louisville, KY 40291-2462
First Clearing Corporation 7,079.0900 23.57%
A/C 7309-7317
Howard B. Smith, Jr.
545 Country Manor Lane
Shepherdsville, KY 40165-9543
<CAPTION>
NATIONAL TAX EXEMPT BOND FUND (I
SHARES)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Sheldon & Co. TTEE 6,991,592.0560 70.54%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
National City Bank 2,646,471.4790 26.70%
c/o Sheldon & Co.
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
PENNSYLVANIA TAX EXEMPT MONEY MARKET
FUND (A )
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Pennsylvania FBO Corporate Autosweep Customers 26,494,000.0000 50.75%
c/o National City Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15222-2003
Pennsylvania National City Bank of Pennsylvania 23,137,517.9800 44.32%
FBO PCG/Retail Sweep Customers
Cash Management Operations
770 W. Broad Street 16-0347
Columbus, OH 43222-1419
-143-
<PAGE>
<CAPTION>
PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
National City Bank 83,658,740.9300 98.85%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
<CAPTION>
TAX EXEMPT MONEY MARKET FUND (A)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
Wheat First Securities 90,570,725.0200 47.38%
P.O. Box 6629
Glen Allen, VA 23058-6629
National City Bank 40,692,943.2400 21.29%
FBO PCG/Retail Sweep Customers
770 W. Broad Street, Location 16-0347
Columbus, OH 43222-1419
National City MI/IL 11,766,352.9400 6.16%
FBO Corporate PCG/Retail Sweep Cust
Cash Management Operations
770 W. Broad Street LOC 16-0347
Columbus, OH 43222-1419
National City MI/IL 12,956,000.0000 6.78%
FBO Corporate Sweep Customer
Cash Management Operations
770 W. Broad Street LOC 16-0347
Columbus, OH 43222-1419
Indiana 23,883,534.5500 12.24%
National City Bank of Indiana
FBO PCG/Retail Sweep Customers
Cash Management Operations
770 W. Broad St. LOC. 16-0347
Columbus, OH 43222-1419
<CAPTION>
TAX EXEMPT MONEY MARKET FUND (I)
OUTSTANDING SHARES PERCENTAGE
<S> <C> <C>
National City Bank 60,767,029.5600 16.08%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
-144-
<PAGE>
National City Bank 33,480,761.5500 8.86%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland,, OH 44135-1389
National City Bank 92,831,979.7800 24.57%
Operations Center
Attn: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 44,071,985.1200 11.66%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 98,378,695.1800 26.03%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND (A)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
OUTSTANDING SHARES PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Wheat First Securities 717,004,002.7800 48.71%
P.O. Box 6629
Glen Allen, VA 23058-6629
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Pennsylvania 284,402,000.0000 19.32%
FBO Corporate Autosweep Customers
c/o National City Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15222-2003
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
National City Bank 226,160,000.0000 15.36%
FBO PCG/Retail Sweep Customer
770 W. Broad St. Location 16-0347
Columbus, OH 43222-1419
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
National City MI/IL 75,647,000.0000 5.14%
FBO Corporate Sweep Customer
Cash Management Operations
770 West Broad Street
LOC 16-0347
Columbus, OH 43222-1419
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-145-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND (B)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
OUTSTANDING SHARES PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First Clearing Corporation 54,390.6100 6.89%
A/C 7335-5550
Roger L. Schafer IRA
WFS as Custodian
3945 7th Street
New Kensington, PA 15068-7205
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
The Marting Bros. Co. 401(k) 626,363.1800 79.38%
Conversion Holding Account
P.O. Box 8705
Boston, MA 02266-8705
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
First Clearing Corporation 70,102.4100 8.88%
A/C 4505-9511
John M. Jervis
301 W. Beardsley
Champaign, IL 61820-2927
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND (I)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
OUTSTANDING SHARES PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
National City Bank 810,086,251.9200 36.15%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-146-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
National City Bank 187,309,356.8600 8.36%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
National City Bank 241,301,295.6500 10.77%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
National City Bank 252,690,912.4000 11.28%
Operations Center
Attn: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Whitelaw & Co. 130,096,616.3480 5.81%
Daily Valuation Account - Disc.
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
GOVERNMENT MONEY MARKET FUND (A)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
OUTSTANDING SHARES PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-147-
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pennsylvania FBO Corporate Autosweep Customers 229,072,000.0000 38.69%
c/o National City Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15222-2003
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Wheat First Securities 68,336,724.5900 11.54%
P.O. Box 6629
Glen Allen, VA 23058-6629
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
National City MI/IL 242,407,000.0000 40.94%
FBO Corporate Sweep Customer
Cash Management Operations
770 W. Broad Street Loc. 16-0347
Columbus, OH 43222-1419
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
GOVERNMENT MONEY MARKET FUND (I)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
OUTSTANDING SHARES PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
National City Bank 79,528,299.9200 7.90%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 West 150th Street
Cleveland, OH 44135-1389
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
National City Bank 244,473,515.7100 24.28%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
National City Bank 388,960,840.2500 33.67%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-148-
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
National City Bank 115,378,434.8700 11.46%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
National City Bank 106,235,893.6600 10.55%
Operations Center
Attn: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
TREASURY MONEY MARKET FUND (A)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
OUTSTANDING SHARES PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Wheat First Securities 5,252,114.4200 7.53%
P.O. Box 6629
Glen Allen, VA 23058-6629
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
National City Bank MI/IL 59.002,000.0000 84.56%
FBO Corporate Sweep Customer
Cash Management Operations
770 W. Broad St. Location 16-0347
Columbus, OH 43222-1419
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TREASURY MONEY MARKET FUND (I)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
OUTSTANDING SHARES PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
National City Bank 54,163,130.7600 16.76%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
National City Bank 66,204,661.7700 20.48%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-149-
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
National City Bank 86,894,693.1000 26.89%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
National City Bank 28,389,677.9100 8.78%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
National City Bank 40,842,690.4000 12.64%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-150-
<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.
-151-
<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.
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
A-1
<PAGE>
"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 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
A-2
<PAGE>
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 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.
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"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.
"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:
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"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.
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.
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"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, 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.
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Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effects of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The 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.
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"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:
"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.
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<PAGE>
"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.
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.
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"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.
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.
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<PAGE>
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effects of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The 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.
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"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years. The following
summarizes the rating categories used by Fitch for short-term obligations:
"F-1+" - Securities possess exceptionally strong credit quality.
Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less in degree
than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for 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."
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"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.
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.
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<PAGE>
"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 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.
<PAGE>
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 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.
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<PAGE>
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.
B-3
<PAGE>
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.
B-5
<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 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
B-6
<PAGE>
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
<PAGE>
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.
B-8
<PAGE>
FORM N-1A
---------
Part C - Other Information
Item 23. Exhibits
(a) Declaration of Trust dated January 28, 1986.
1. Amendment No. 1 to Declaration of Trust.
2. Amendment No. 2 to Declaration of Trust.
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 incorporated herein by
reference to Exhibit a.3. to Post-Effective Amendment
No. 47 to Registrant's Registration Statement on Form
N-1A (File Nos. 33-488/811-4416) filed on
September 10, 1999 ("PEA No. 47").
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 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 shares,
Class N and Class N-Special Series 1 shares, Class O
and Class O-Special Series 1 shares, and Class P and
Class P-Special Series 1 shares representing interests
in the National Tax Exempt Fund, Equity Income Fund,
Mid Cap
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<PAGE>
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
shares, Class R and Class R-Special Series 1 shares,
Class S and Class S-Special Series 1 shares, and Class
T and Class T-Special Series 1 shares representing
interests in the Pennsylvania Tax Exempt Fund,
Intermediate Government Fund, GNMA Fund and
Pennsylvania Municipal Fund, 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 Fund, 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, 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
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<PAGE>
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.
1. Amendment No. 1 to Code of Regulations.
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.
(c) Article V, Section 5.1, and Article V, Section 5.4, of
Registrant's Declaration of Trust.
(d) 1. 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, 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
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<PAGE>
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 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) 1. Custodian Services Agreement between Registrant and
National City Bank, dated November 7, 1994.
2. Sub-Custodian Agreement between National City Bank and
The Bank of California, National Association, dated
November 7, 1994.
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.
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<PAGE>
(h) 1. 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.
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 is incorporated
herein by reference to Exhibit (h)(8) to Post-Effective
Amendment No. 46 to Registrant's Registration Statement
filed on July 15, 1999 ("PEA No. 46").
(i) Opinion and consent of Drinker Biddle & Reath LLP as counsel
to Registrant is incorporated herein by reference to
Exhibit 10(a) to PEA No. 44.
(j) Consent of Drinker Biddle & Reath LLP.
(k) Consent of Ernst & Young LLP.
(l) 1. Purchase Agreements between Registrant and McDonald &
Company Securities, Inc. dated
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<PAGE>
2. Purchase Agreement between Registrant and McDonald &
Company Securities, Inc. with respect to the Tax Exempt
Portfolio dated July 19, 1988.
3. Purchase Agreement between Registrant and McDonald &
Company Securities, Inc. with respect to the Tax Exempt
Portfolio (Trust), dated October 17, 1989.
4. Purchase Agreement between Registrant and McDonald &
Company Securities, Inc. with respect to the Equity
Portfolio and Bond Portfolio, dated December 20, 1989.
5. Purchase Agreement between Registrant and McDonald &
Company Securities, Inc. with respect to the Ohio Tax
Exempt Portfolio, dated January 5, 1990.
6. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Enhanced Income
Fund, dated July 5, 1994.
7. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Equity Income
Portfolio, dated June 30, 1994.
8. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Mid Cap Regional
Equity Portfolio, dated July 25, 1994.
9. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Total Return
Advantage Fund, dated July 5, 1994.
10. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the National Tax
Exempt Fund.
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
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<PAGE>
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.
15. Purchase Agreement between Registrant and SEI
Investments Distribution Co. 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) 1. Service and Distribution Plan for the A (formerly,
Retail) and I (formerly, Institutional) Share Classes
is incorporated herein by reference to Exhibit 15(a) to
PEA No. 38.
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<PAGE>
2. B shares Distribution and Servicing Plan is
incorporated herein by reference to Exhibit 15(b) to
PEA No. 38.
3. C Shares Distribution and Servicing Plan is
incorporated herein by reference to Exhibit m.3. to
PEA No. 47.
(n) None.
(o) Revised Plan Pursuant to Rule 18f-3 for Operation of a
Multi-Class System is incorporated herein by reference to
Exhibit o to PEA No. 47.
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, filed as Exhibit (a) 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
C-8
<PAGE>
bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties, PROVIDED that as to any matter disposed of
by a compromise payment by such person, pursuant to a consent
decree or otherwise, no indemnification either for said payment or
for any other expenses shall be provided unless the Trust shall
have received a written opinion from independent legal counsel
approved by the Trustees to the effect that if either the matter of
willful misfeasance, gross negligence or reckless disregard of
duty, or the matter of bad faith had been adjudicated, it would in
the opinion of such counsel have been adjudicated in favor of such
person. The rights accruing to any person under these provisions
shall not exclude any other right to which he may be lawfully
entitled, PROVIDED that no person may satisfy any right of
indemnity or reimbursement hereunder except out of the property of
the Trust. The Trustees may make advance payments in connection
with the indemnification under this Section 9.3, PROVIDED that the
indemnified person shall have provided a secured written
undertaking to reimburse the Trust in the event it is subsequently
determined that he is not entitled to such indemnification.
The Trustees shall indemnify representatives and employees of the
Trust to the same extent that Trustees are entitled to
indemnification pursuant to this Section 9.3.
Section 12 of Registrant's Custodian Services Agreement provides as
follows:
12. INDEMNIFICATION. The Trust, on behalf of each of the Funds,
agrees to indemnify and hold harmless the Custodian and its
nominees from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising
under the 1933 Act, the 1934 Act, the 1940 Act, the CEA, and any
state and foreign securities and blue sky laws, and amendments
thereto), and expenses, including (without limitation) reasonable
attorneys' fees and disbursements, arising directly or indirectly
from any 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-9
<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 under this Agreement, and the Bank and
its agents or subcontractors shall not be liable and shall be
indemnified by the Fund on behalf of the
C-10
<PAGE>
applicable Portfolio for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such
counsel (provided such counsel is reasonably satisfactory to
the Fund). The Bank, its agents and subcontractors shall be
protected and indemnified in acting upon any paper or
document, reasonably believed to be genuine and to have been
signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided
the Bank or its agents or subcontractors by machine readable
input, telex, CRT data entry or other similar means
authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of
written notice thereof from the Fund. The Bank, its agents
and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed
to bear the proper manual or facsimile signatures of the
officers of the Fund, and the proper countersignature of any
former transfer agent or former registrar, or of a
co-transfer agent or co-registrar.
6.3 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts
of God, strikes, equipment or transmission failure or damage
reasonably beyond its control, or other causes reasonably
beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
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-11
<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-12
<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 National City Bank Bank affiliate
Director, Sales
and Marketing
Susan E. Kentosch Vice President National City Bank Bank affiliate
and Chief
Compliance
Officer
Robert M. Leggett Vice Chairman of National City Bank Bank affiliate
the Board,
President and
Managing
Director
Michael Minnaugh Chairman of the National City Bank Bank affiliate
Board and
Managing
Director
Joseph C. Penko Vice President National City Bank Bank affiliate
and 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 are the names and principal
business of the directors and certain of the senior executive officers
C-13
<PAGE>
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 Other
National Asset Business Type of
Name Management Connections Business
- ---- -------------- ----------- --------
<S> <C> <C> <C>
William F. Chandler Founder and Principal
Carl W. Hafele CEO and Principal None
Michael C. Heyman Principal None
David B. Hiller Principal None
Stephen G. Mullins Principal None
Larry J. Walker Principal None
John W. Ferreby Principal None
Catherine R. Stodghill Principal None
Erik N. Evans Principal None
Brent A. Bell Principal None
Randall T. Zipfel COO and Principal None
Matt Bevin Principal None
Dave Chick Principal None
</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.
Registrant's distributor, SEI Investments Distribution Co. (the
"Distributor"), acts as distributor for:
C-14
<PAGE>
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-15
<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 & --
Treasurer
Jeff Jacobs Vice President --
</TABLE>
C-16
<PAGE>
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President & 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 Secretary Assistant Treasurer
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
(records relating to its function as sub-adviser to the
Core Equity and Total Return Advantage Funds).
(b) SEI Investments Distribution Co., One Freedom Valley Drive,
Oaks, Pennsylvania 19456 (records relating to its function as
distributor, accounting agent and administrator).
C-17
<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-18
<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-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant certifies that it
meets all of the requirements for effectiveness of this registration statement
under Rule 485(b) under the Securities Act and has duly caused this
Post-Effective Amendment No. 48 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 6th day of October,
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. 48 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 October 6, 1999
- -------------------
John H. Leven
*Leigh Carter Trustee October 6, 1999
- -------------------
Leigh Carter
*John F. Durkott Trustee October 6, 1999
- -------------------
John F. Durkott
*Robert J. Farling Trustee October 6, 1999
- -------------------
Robert J. Farling
*Richard E. Furst Trustee October 6, 1999
- -------------------
Richard W. Furst
*Gerald Gherlein Trustee October 6, 1999
- -------------------
Gerald Gherlein
*Herbert Martens President and Trustee October 6, 1999
- -------------------
Herbert Martens
* Robert D. Neary Trustee and Chairman October 6, 1999
- ------------------- of the Board
Robert D. Neary
C-20
<PAGE>
* J. William Pullen Trustee October 6, 1999
- -------------------
J. William Pullen
*By: /s/ W. Bruce McConnel, III
--------------------------
W. Bruce McConnel, III
Attorney-in-Fact
C-21
<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: September 17, 1997
/s/ Robert D. Neary
- -------------------
Robert D. Neary
<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: September 17, 1997
/s/ Leigh Carter
- ----------------
Leigh Carter
<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: September 17, 1997
/s/ John F. Durkott
- -------------------
John F. Durkott
<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: September 17, 1997
/s/Richard W. Furst
- -------------------
Richard W. Furst
<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
<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: September 17, 1997
/s/ J. William Pullen
- ---------------------
J. William Pullen
<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: September 17, 1997
/s/ Herbert R. Martens, Jr.
- ---------------------------
Herbert R. Martens, Jr.
<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: September 17, 1997
/s/ Gerald L. Gherlein
- ----------------------
Gerald L. Gherlein
<PAGE>
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, John H. Leven,
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: July 14, 1999
/s/John H. Leven
- ----------------
John H. Leven
<PAGE>
ARMADA FUNDS
CERTIFICATE OF SECRETARY
The following resolution was duly adopted by the Board of Trustees 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: October 4, 1999
<PAGE>
EXHIBIT INDEX
(a) Declaration of Trust dated January 28, 1986.
(a)(1) Amendment No. 1 to Declaration of Trust.
(a)(2) Amendment No. 2 to Declaration of Trust.
(b) Code of Regulations as approved and adopted by Registrant's Board
of Trustees on January 28, 1986.
(b)(1) Amendment No. 1 to Code of Regulations.
(g)(1) Custodian Services Agreement between Registrant and National City
Bank, dated November 7, 1994.
(g)(2) Sub-Custodian Agreement between National City Bank and The Bank of
California, National Association, dated November 7, 1994.
(l)(1) Purchase Agreement between Registrant and McDonald & Company
Securities, Inc. dated January 28, 1986.
(l)(2) Purchase Agreement between Registrant and McDonald & Company
Securities, Inc. with respect to the Tax Exempt Portfolio dated
July 19, 1988.
(l)(3) Purchase Agreement between Registrant and McDonald & Company
Securities, Inc. with respect to the Tax Exempt Portfolio (Trust),
dated October 17, 1989.
(l)(4) Purchase Agreement between Registrant and McDonald & Company
Securities, Inc. with respect to the Equity Portfolio and Bond
Portfolio dated December 20, 1989.
(l)(5) Purchase Agreement between Registrant and McDonald & Company
Securities, Inc. with respect to the Ohio Tax Exempt Portfolio,
dated January 5, 1990.
(l)(6) Purchase Agreement between Registrant and Allmerica Investments,
Inc. with respect to the Enhanced Income Fund, dated July 5, 1994.
(l)(7) Purchase Agreement between Registrant and Allmerica Investments,
Inc. with respect to the Equity Income Portfolio, dated June 30,
1994.
<PAGE>
(l)(8) Purchase Agreement between Registrant and Allmerica Investments,
Inc. with respect to the Mid Cap Regional Equity Portfolio, dated
July 25, 1994.
(l)(9) Purchase Agreement between Registrant and Allmerica Investments,
Inc. with respect to the Total Return Advantage Fund, dated July 5,
1994.
(l)(10) Purchase Agreement between Registrant and Allmerica Investments,
Inc. with respect to the National Tax Exempt Fund dated _____,1994.
(j) Consent of Drinker Biddle & Reath LLP.
(k) Consent of Ernst & Young LLP.
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DECLARATION OF TRUST
NCC FUNDS
January , 1986
DECLARATION OF TRUST, made as of January , 1986 by Andrew T.
Greenberg (the "Trustee"):
WHEREAS, the Trustee desires to establish a trust fund for the
investment and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustee declares that all money and property
contributed to the trust fund hereunder shall be held and managed under this
Declaration of Trust for the pro rata benefit of the holders from time to time
of the Shares, as herein set forth below.
I.
NAME
This trust shall be known as NCC FUNDS, (hereinafter called the
"Trust"), and the Trustees shall conduct the business of the Trust under that
name or any other name as they shall from time to time determine.
II.
DEFINITIONS
2.1 DEFINITION OF CERTAIN TERMS. As used in this Declaration of Trust,
the terms set forth below shall have the following meanings:
A. The "Act" refers to the Investment Company Act of 1940, as now
or hereafter amended, to the rules and regulations adopted from time to time
thereunder and to any order or orders thereunder which may from time to time be
applicable to the Trust.
B. The terms "affiliated person," "assignment" and "interested
person" shall have the respective meanings set forth in the Act. The term "vote
of a majority of outstanding Shares" shall mean the "vote of a majority of the
outstanding voting securities" as defined in the Section 2(a)(42) of the Act.
<PAGE>
C. The "Regulations" shall refer to the Code of Regulations of
the Trust as adopted and amended from time to time.
D. The "Declaration of Trust" shall mean this Declaration of
Trust as amended or restated from time to time.
E. "Person" shall mean a natural person, a corporation, a
partnership, an association, a joint-stock company, a trust, a fund or any
organized group of persons whether incorporated or not.
F. "Shares" means the equal proportionate transferable units of
interest of each class into which the beneficial interest in the Trust may be
classified or reclassified from time to time by the Trustees acting under this
Declaration of Trust, or in the absence of such action, means the equal
proportionate transferable units of interest into which the entire beneficial
interest in the Trust shall be divided from time to time, and includes fractions
of Shares as well as whole Shares.
G. "Shareholder" means a record owner of Shares in the Trust.
H. The "Trustees" refers to the individual trustees of the Trust
named herein or elected in accordance with Article VI hereof in their capacity
as trustees hereunder and not as individuals and to their successor or
successors while serving in office as a trustee of the Trust, and includes a
single trustee.
I. "Trust Property" means any and all assets and property, real
or personal, tangible or intangible, which is owned or held by or for the
account of the Trust or the Trustees.
III.
PURPOSE OF TRUST
The Trust is a Massachusetts business trust of the type described in
Chapter 182 section 1 of the General Laws of the Commonwealth of Massachusetts
formed for the purpose of acting as a management investment company under the
Act; PROVIDED, HOWEVER, that the Trust may exercise all powers which are
ordinarily exercised by or permissible for Massachusetts business trusts.
IV.
OWNERSHIP OF ASSETS OF THE TRUST
The assets of the Trust shall be held separate and apart from any
assets now or hereafter held in any capacity, other than as Trustees hereunder,
by the Trustees, including
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without limitation any successor Trustees. Legal title to all the assets of the
Trust shall be vested in the Trustees as joint tenants except that the Trustees
shall have power to cause legal title to any assets of the Trust to be held by
or in the name of one or more of the Trustees, or in the name of the Trust, or
in the name of any other person as nominee, on such terms as the Trustees may
reasonably determine. The right, title and interest of the Trustees in the
assets of the Trust shall vest automatically in each person who may hereafter
become a Trustee. Upon the resignation, removal or death of a Trustee, such
Trustee shall automatically cease to have any right, title or interest in any of
the assets of the Trust, and the right, title and interest of such Trustee in
the assets of the Trust shall vest automatically in the remaining Trustees. Such
vesting and cessation of title shall be effective regardless of whether
conveyancing documents (pursuant to Section 6.6 hereof or otherwise) have been
executed and delivered. Except to the extent otherwise required by Article V
hereof, no Shareholder shall be deemed to have severable ownership in any
individual asset of the Trust or any right of partition or possession thereof,
or shall be called upon to assume any loss of the Trust nor can he be called
upon to assume any loss of the Trust or suffer an assessment of any kind by
virtue of his ownership of Shares, but each Shareholder shall have a
proportionate undivided beneficial interest in the assets belonging to the class
of Shares held by such Shareholder. The ownership of the Trust Property of every
description and the right to conduct any business hereinbefore described shall
be vested exclusively in the Trustees, and the Shareholders shall have no
interest therein other than the beneficial interest conferred by their Shares,
and they shall have no right to call for any partition or division of any
property, profits, rights or interests of the Trust nor can they be called upon
to assume any losses of the Trust or suffer an assessment of any kind by virtue
of their ownership of Shares. The Shares shall be personal property giving only
the rights specifically set forth in this Declaration of Trust. Shares shall not
entitle any holder thereof to preference, pre-emptive, appraisal, conversion or
exchange rights, except as the Trustees may determine pursuant to Article V
hereof.
V.
SHAREHOLDERS; BENEFICIAL INTEREST IN THE TRUST;
PURCHASE AND REDEMPTION OF SHARES
5.1 SHARES IN THE TRUST.
A. The beneficial interest in the Trust shall at all times be
divided into an unlimited number of full and fractional transferable Shares
without par value. All Shares shall be of one class, PROVIDED that subject to
this Declaration of Trust and the requirements of applicable law, the Trustees
shall have the power to classify or reclassify any unissued Shares into any
number of additional classes of Shares by setting or changing in any one or more
respects, from time to time before the issuance thereof, their designations,
preferences, conversion or other rights, voting powers, restrictions,
limitations, qualifications or terms or conditions of redemption, PROVIDED
FURTHER that the investment objectives, policies and restrictions governing the
management and operations of the Trust, including the management of assets
belonging to any class of Shares, may from time to time be changed or
supplemented by the Trustees, subject to the requirements of the Act. The power
of the Trustees to classify or reclassify Shares shall include, without
limitation, the power to classify or reclassify any class of
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<PAGE>
Shares into one or more series of such class. All references to Shares in this
Declaration of Trust which are not accompanied by a reference to any particular
class of Shares shall be deemed to apply to all outstanding Shares of any and
all classes. All references in this Declaration of Trust to any class of Shares
shall include and refer to the Shares of any series thereof.
Upon the issuance of the first Share of a second class of Shares
classified or reclassified by the Trustees pursuant to this Section 5.1, all
Shares theretofore issued and outstanding shall automatically represent Shares
of a separate class having the preferences, conversion and other rights, voting
powers, restrictions, limitations, qualifications and terms and conditions of
redemption provided for in this Declaration of Trust with respect to any class
of Shares. The Trustees may from time to time divide or combine the outstanding
Shares of the Trust or of any class into a greater or lesser number without
thereby changing the proportionate beneficial interest of the Shares in the
Trust so divided or combined or in the assets belonging to such class as the
case may be.
B. Subject to the power of the Trustees to classify and
reclassify any unissued Shares pursuant to subsection A of this Section 5.1,
Shares of the Trust shall have the following preferences, conversion and other
rights, voting powers, restrictions, limitations, qualifications and terms and
conditions of redemption:
(1) ASSETS BELONGING TO A CLASS. All consideration received
by the Trust for the issue or sale of Shares of any class, together with all
income, earnings, profits and proceeds derived from the investment thereof,
including any proceeds derived from the sale, exchange or liquidation of such
investments, any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, and any general assets of the Trust
not belonging to a particular class which the Trustees may, in their sole
discretion, allocate to a class, shall irrevocably belong to the class of Shares
with respect to which such assets, payments or funds were received or allocated
for all purposes, subject only to the rights of creditors, and shall be so
handled upon the books of account of the Trust. Such assets and the income,
earnings, profits and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation thereof, and any assets derived from any
reinvestment of such proceeds in whatever form, are herein referred to as
"assets belonging to" such class. Shareholders of any class of Shares shall have
no right, title or interest in or to the assets belonging to any other class.
(2) LIABILITIES BELONGING TO A CLASS. The assets belonging
to any class of Shares shall be charged with the direct liabilities in respect
of such class. General liabilities of the Trust shall be allocated to each class
in equal proportions PROVIDED that the Board of Trustees may in their discretion
direct that any one or more general liabilities of the Trust be allocated to the
respective classes of Shares on a different basis. The direct liabilities in
respect of a class and the general liabilities of the Trust so allocated are
herein referred to as "liabilities belonging to" such class.
(3) DIVIDENDS AND DISTRIBUTIONS. Shares of each class shall
be entitled to such dividends and distributions, in Shares or in cash or both,
as may be declared from time to time by the Trustees, acting in their sole
discretion, with respect to such class, PROVIDED that dividends and
distributions on Shares of a particular class shall be paid only out of the
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<PAGE>
lawfully available "assets belonging to" such class as such term is defined in
subsection C(l) of this Section 5.1.
(4) LIQUIDATING DISTRIBUTIONS. In the event of the
termination of the Trust and the winding up of its affairs, the Shareholders of
each class shall be entitled to receive, as a class, out of the assets of the
Trust available for distribution to Shareholders, but other than general assets
not belonging to any particular class of Shares, the assets belonging to such
class; and the assets so distributable to the Shareholders of any class shall be
distributed among such Shareholders in proportion to the number of Shares of
such class held by them and recorded in their name on the books of the Trust. In
the event that there are any general assets not belonging to any particular
class of Shares and available for distribution, such distribution shall be made
to the Shareholders of all classes in proportion to the relative net assets of
the respective classes determined as hereinafter provided and the number of
Shares of such class held by them and recorded in their name on the books of the
Trust.
(5) VOTING. The holder of each Share shall be entitled to
one vote for each full Share, and a proportionate fractional vote for each
fractional Share, irrespective of the class, then recorded in his name on the
books of the Trust, to the extent provided in Article VIII hereof.
(6) PRE-EMPTIVE RIGHTS. Shareholders shall have no
pre-emptive or other rights to subscribe to any additional Shares or other
securities issued by the Trust.
(7) CONVERSION RIGHTS. The Trustees shall have the authority
to provide from time to time that the holders of Shares of any class shall have
the right to convert or exchange said Shares for or into Shares of one or more
other classes in accordance with such requirements and procedures as may be
established from time to time by the Trustees.
(8) REDEMPTION OF SHARES. To the extent of the assets of the
Trust legally available for such redemptions, a Shareholder of the Trust shall
have the right to require the Trust to redeem his full and fractional Shares of
any class out of assets belonging to such class at a redemption price equal to
the net asset value per Share next determined after receipt of a request to
redeem in proper form as determined by the Trustees, subject to the right of the
Trustees to suspend the right of redemption of Shares or postpone the date of
payment of such redemption price in accordance with the provisions of applicable
law. The Trustees shall establish such rules and procedures as they deem
appropriate for the redemption of Shares, provided that all redemptions shall be
in accordance with the Act. Without limiting the generality of the foregoing,
the Trust shall, to the extent permitted by applicable law, have the right at
any time to redeem the Shares owned by any holder thereof: (a) in connection
with the termination of any class of Shares as provided hereunder; (b) if the
value of such Shares in the account or accounts maintained by the Trust or its
transfer agent for any class or classes of Shares is less than the value
determined from time to time by the Trustees as the minimum required for an
account or accounts of such class or classes, PROVIDED that the Trust shall
provide a Shareholder with written notice at least fifteen (15) days prior to
effecting a redemption of Shares as a result of not satisfying such requirement;
(c) to reimburse the Trust for any loss it has
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<PAGE>
sustained by reason of the failure of such Shareholder to make full payment for
Shares purchased by such Shareholder; (d) to collect any charge relating to a
transaction effected for the benefit of such Shareholder which is applicable to
Shares as provided in the prospectus relating to such Shares; or (e) if the net
income with respect to any particular class of Shares should be negative or it
should otherwise be appropriate to carry out the Trust's responsibilities under
the Investment Company Act of 1940, in each case subject to such further terms
and conditions as the Trustees may from time to time establish. The redemption
price of Shares in the Trust shall, except as otherwise provided in this
section, be the net asset value thereof as determined by the Trustees from time
to time in accordance with the provisions of applicable law, less such
redemption fee or other charge, if any, as may be fixed by the Trustees. When
the net income of any class with respect to which the Trustees have, in their
discretion, established a policy of maintaining a constant net asset value per
Share is negative or whenever deemed appropriate by the Trustees in order to
carry out the Trust's responsibilities under the Investment Company Act of 1940,
the Trust may, without payment of compensation but in consideration of the
interests of the Trust and the holders of Shares of such class in maintaining a
constant net asset value per Share of such class, redeem pro rata from each
holder of record on such day, such number of full and fractional Shares of such
class as may be necessary to reduce the aggregate number of outstanding Shares
in order to permit the net asset value thereof to remain constant. Payment of
the redemption price, if any, shall be made in cash by the Trust at such time
and in such manner as may be determined from time to time by the Trustees
unless, in the opinion of the Trustees, which shall be conclusive, conditions
exist which make payment wholly in cash unwise or undesirable; in such event the
Trust may make payment in the assets belonging or allocable to the class of the
Shares redemption of which is being sought, the value of which shall be
determined as provided herein.
(9) TERMINATION OF A CLASS. Without the vote of the Shares
of any class then outstanding (unless otherwise required by applicable law), the
Trustees may:
(a) Sell and convey the assets belonging to a class of
Shares to another trust or corporation that is a management investment company
(as defined in the Investment Company Act of 1940) and is organized under the
laws of any state of the United States for consideration which may include the
assumption of all outstanding obligations, taxes and other liabilities, accrued
or contingent, belonging to such class and which may include securities issued
by such trust or corporation. Following such sale and conveyance, and after
making provision for the payment of any liabilities belonging to such class that
are not assumed by the purchaser of the assets belonging to such class, the
Trust may, at the Trustees' option, redeem all outstanding shares of such class
at the net asset value thereof as determined by the Trustees in accordance with
the provisions of applicable law, less such redemption fee or other charge, if
any, as may be fixed by the Trustees. Notwithstanding any other provision of
this Declaration of Trust to the contrary, the redemption price may be paid in
cash or by distribution of the securities or other consideration received by the
Trust for the assets belonging to such class upon such conditions as the
Trustees deem, in their sole discretion, to be appropriate consistent with
applicable law and this Declaration of Trust;
(b) Sell and convert the assets belonging to a class of
Shares into money and, after making provision for the payment of all
obligations, taxes and other
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<PAGE>
liabilities, accrued or contingent, belonging to such class, the Trust may, at
the Trustees' option, (i) redeem all outstanding shares of such class at the net
asset value thereof as determined by the Trustees in accordance with the
provisions of applicable law, less such redemption fee or other charge, if any,
as may be fixed by the Trustees upon such conditions as the Trustees deem, in
their sole discretion, to be appropriate consistent with applicable law and this
Declaration of Trust; or (ii) combine the assets belonging to such class
following such sale and conversion with the assets belonging to any one or more
other classes of Shares pursuant to and in accordance with subsection C of this
Section 5.9; or
(c) Combine the assets belonging to a class of Shares
with the assets belonging to any one or more other classes of Shares if the
Trustees reasonably determine that such combination will not have a material
adverse effect on the Shareholders of any class participating in such
combination. In connection with any such combination of assets the Shares of any
class then outstanding may, if so determined by the Trustees, be converted into
shares of any other class or classes of Shares with respect to which conversion
is permitted by applicable law, or may be redeemed, at the option of the
Trustees, at the net asset value thereof as determined by the Trustees in
accordance with the provisions of applicable law, less such redemption fee or
other charge, or conversion cost, if any, as may be fixed by the Trustees upon
such conditions as the Trustees deem, in their sole discretion, to be
appropriate consistent with applicable law and this Declaration of Trust.
Notwithstanding any other provision of this Declaration of Trust to the
contrary, any redemption price, or part thereof, paid pursuant to this
subsection may be paid in Shares of any other existing or future class or
classes.
In connection with the termination of a class of Shares and the
winding up of its affairs, all of the powers of the Trustees under this
Declaration of Trust shall continue until the affairs of such class shall have
been wound up, including the power to fulfill or discharge the contracts of the
Trust relating to such class, to collect assets belonging to such class, to
sell, convey, assign, exchange, transfer or otherwise dispose of all or any part
of the remaining assets belonging to such class to one or more persons at public
or private sale for consideration that may consist in whole or in part of cash,
securities or other property of any kind, to discharge or pay the liabilities
belonging to such class, and to do all other acts appropriate to liquidate the
business of such class, provided that the holders of Shares of any class shall
not be entitled in any liquidation to receive any distribution upon the assets
belonging to any other class.
After the excess of the assets belonging to any class over the
liabilities belonging to such class have been distributed among the Shareholders
of such class in proportions to the numbers of Shares held by them and recorded
on the books of the Trust, the Trustees may authorize the termination of such
class of Shares.
5.2 PURCHASE OF SHARES. The Trustees may accept investments in the
Trust from such persons for such consideration, including cash or property, and
on such other terms as they may from time to time authorize and the Trustees may
in such manner acquire other assets (including the acquisition of assets subject
to, and in connection with, the assumption of liabilities) and businesses. The
Trustees may in their discretion reject any order for the purchase of Shares.
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<PAGE>
5.3 NET ASSET VALUE PER SHARE. The net asset value per Share of any
class of Shares shall be computed at such time or times as the Trustees may
specify pursuant to the Act. Assets shall be valued and net asset value per
Share shall be determined by such person or persons as the Trustees may appoint
under the supervision of the Trustees in such manner as the Trustees may
determine not inconsistent with the Act.
5.4 OWNERSHIP OF SHARES. The ownership of Shares shall be recorded on
the record books of the Trust. The Trustees may make such rules and regulations
as they consider appropriate for the issuance of Share certificates, the
transfer of Shares and similar matters. Certificates certifying the ownership of
Shares may be issued as the Trustees may determine from time to time, PROVIDED
that the Trustees shall have the power to call outstanding Share certificates
and to replace them with book entries. The record books of the Trust shall be
conclusive as to the identity of holders of Shares and as to the number of
Shares held by each Shareholder.
VI.
THE TRUSTEES
6.1 MANAGEMENT OF THE TRUST. The affairs of the Trust shall be managed
by the Trustees and they shall have all powers necessary or desirable to carry
out such responsibility, including without limitation the appointment of and
delegation of responsibility to such officers, employees, agents, and
contractors as they may select.
6.2 NUMBER AND TERM OF OFFICE. The number of Trustees shall be
determined from time to time by the Trustees themselves, but shall not be more
than ten. Subject to the provisions of this section relating to resignation or
removal, the Trustees shall have the power to set and alter the terms of office
of the Trustees, and they may at any time lengthen or shorten their own terms or
make their terms of unlimited duration, PROVIDED that the term of office of any
incumbent Trustee shall continue until terminated as provided in Section 6.5
hereof, or, if not so terminated until the election of such Trustee's successor
in office has become effective in accordance with this section. A Trustee shall
qualify by accepting in writing his election or appointment and agreeing to be
bound by the provisions of this Declaration of Trust. Except as otherwise
provided herein in the case of vacancies, Trustees (other than the Initial
Trustee provided in Section 6.3 hereof) shall be elected by the Shareholders at
such time or times as the Trustees shall determine that such election is
required under Section 16(a) of the Act or is otherwise advisable.
Notwithstanding the foregoing, (a) any Trustee may resign as a Trustee by
written instrument signed by him and delivered to the other Trustees at the
principal business office of the Trust (without need for prior or subsequent
accounting), which shall take effect upon such delivery or upon such later date
as is specified therein; (b) any Trustee may be removed at any time with or
without cause by written instrument, signed by at least two-thirds of the number
of Trustees prior to such removal, specifying the date when such removal shall
become effective; (c) any Trustee who has become incapacitated by illness or
injury may be retired by written instrument signed by a majority of the other
Trustees; and (d) the term of a Trustee shall terminate at his death,
resignation, removal or adjudicated incompetency.
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6.3 INITIAL TRUSTEE. The initial Trustee shall be Andrew T. Greenberg,
who, by his execution hereof, has agreed to be bound by the provisions of this
Declaration of Trust. The initial trustee shall have the power to appoint
additional trustees prior to the public offering of shares.
6.4 QUORUM. At all meetings of the Trustees, a majority of the
Trustees shall constitute a quorum for the transaction of business and the
action of a majority of the Trustees present at any meeting at which a quorum is
present shall be the action of the Trustees unless the concurrence of a greater
proportion is required for such action by law, the Regulations or this
Declaration of Trust. If a quorum shall not be present at any meeting of
Trustees, the Trustees present thereat may by a majority vote adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present. Meetings may be held by means of a
conference telephone circuit or similar communications equipment by means of
which all persons participating may hear each other. The Trustees may also act
without a meeting, unless provided otherwise in this Declaration of Trust or
required by law, by written consents of a majority of the Trustees. As used
herein, a "majority of the Trustees" shall mean a majority of the Trustees in
office at the time in question or if there shall be only one (1) Trustee in
office then such term shall mean such Trustee.
The Trustees may appoint committees of Trustees and delegate powers to
them as provided in the Regulations. Any committee of the Trustees, including an
executive committee, if any, may act with or without a meeting. A quorum for all
meetings of any such committee shall be a majority of the members thereof.
Unless provided otherwise in this Declaration of Trust, any action of any such
committee may be taken at a meeting by vote of a majority of the members present
(a quorum being present) or without a meeting by unanimous written consent of
the members.
6.5 VACANCIES. In case a vacancy shall exist by reason of an increase
in number, or for any other reason, the remaining Trustees may fill such vacancy
by appointing such other person as they in their discretion shall select. An
appointment of a Trustee may be made in anticipation of a vacancy to occur at a
later date by reason of retirement or resignation of the Trustee or an increase
in the number of Trustees; provided, that such appointment will not become
effective prior to such retirement or resignation or such increase in the number
of Trustees. Whenever a vacancy in number of Trustees shall occur, until such
vacancy is filled as provided in this section, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed on the Trustees by the Declaration of
Trust. A written instrument certifying existence of such vacancy signed by a
majority of the Trustees shall be conclusive evidence of the existence of such
vacancy. Such appointment shall be evidenced by a written instrument signed by a
majority of the then Trustees but the appointment shall not take effect until
the individual so named shall have qualified by accepting in writing the
appointment and agreeing to be bound by the terms of this Declaration of Trust.
A vacancy may also be filled by the Shareholders in an election held at an
annual or special meeting. As soon as any Trustee so appointed or elected shall
have qualified, the Trust estate shall vest in the new Trustee or Trustees,
together with the continuing Trustees, without any further act or conveyance.
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6.6 EFFECT OF DEATH, RESIGNATION, ETC. OF TRUSTEE. The death,
resignation, removal, or incapacity of the Trustees, or any one of them, shall
not operate to annul the Trust or to revoke any existing agency created pursuant
to the terms of this Declaration of Trust. Upon the resignation or removal of a
Trustee, or his otherwise ceasing to be a Trustee, he shall execute and deliver
such documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust property held in the
name of the resigning or removed Trustee. Upon the incapacity or death of any
Trustee, his legal representative shall execute and deliver on his behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence. The failure to request or deliver such documents shall not affect the
operation of the provisions of Article IV hereof.
6.7 POWERS. The Trustees in all instances shall act as principals and
are and shall be free from the control of the Shareholders. The Trustees shall
have full power and authority to do any and all acts and to make and execute any
and all contracts and instruments that they may consider necessary or desirable
in connection with the management of the Trust. The Trustees shall not be bound
or limited by present or future laws or customs in regard to Trust investments,
but shall have full authority and power to make any and all investments which
they, in their uncontrolled discretion, shall deem proper to accomplish the
purpose of this Trust. Without limiting the foregoing, and subject to any
applicable limitation in this Declaration of Trust or the Regulations, the
Trustees shall have power and authority:
A. To conduct, operate and carry on, either directly or thorough
one or more wholly-owned subsidiaries, the business of an investment company or
any other lawful business activity which the Trustees, in their sole and
absolute discretion, consider to be (1) incidental to the business of the Trust
or such class of Shares as an investment company, (2) conducive to or expedient
for the benefit or protection of the Trust or the Shareholders of such class of
Shares, or (3) calculated in any other manner to promote the interests of the
Trust or the Shareholders of such class of Shares.
B. To adopt a Code of Regulations (the "Regulations") not
inconsistent with this Declaration of Trust providing for the conduct of the
affairs of the Trust and to amend and repeal them to the extent that they do not
reserve that right solely to the Shareholders.
C. To issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares of the
Trust; and to apply to any such repurchase, redemption, retirement, cancellation
or acquisition of Shares, any funds or other assets of the Trust, whether
constituting capital or surplus or otherwise, to the full extent now or
hereafter permitted by applicable law; and to divide or combine Shares without
thereby changing the proportionate beneficial interest in the Trust.
D. To issue, acquire, hold, resell, convey, write options on, and
otherwise deal in securities, debt instruments and other instruments and rights
of a financial character and to apply to any acquisition of securities any
property of the Trust whether from capital or surplus or otherwise.
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E. To invest and reinvest cash, and to hold cash uninvested.
F. To borrow money, issue guarantees of indebtedness or
contractual obligations of others, to sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the Trust Property.
G. To act as a distributor of Shares and as underwriter of, or
broker or dealer in, securities or other property.
H. To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such Person or Persons as the Trustees
shall deem proper, granting to such Person or Persons such power and discretion
with relation to securities or property as the Trustees shall deem proper.
I. To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities.
J. To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in the name
of the Trustees or of the Trust or in the name of a custodian, sub-custodian or
other depositary or a nominee or nominees or otherwise.
K. To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer; any
security of which is or was held in the Trust; and consent to any contract,
lease, mortgage, purchase or sale of property by such corporation or issuer; and
to pay calls or subscriptions with respect to any security held in the Trust.
L. To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or Transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such portion of the
expenses and compensation of such committee, depositary or trustee as the
Trustees shall deem proper.
M. To enter into joint ventures, general or limited partnerships
and any other combination or associations.
N. To enter into contracts of any kind and description.
O. To collect all property due to the Trust, to pay all claims,
including taxes, against the assets belonging to the Trust, to prosecute,
defend, compromise, arbitrate, or otherwise adjust claims in favor of or against
the Trust or any matter in controversy including, but not limited to, claims for
taxes, to foreclose any security interest securing any obligations by
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virtue of which any property is owed to the Trust, and to enter into releases,
agreements and other instruments.
P. To retain and employ any Person or Persons to serve on behalf
of the Trust as investment adviser, administrator, transfer agent, custodian,
underwriter, distributor or in such other capacities as they consider desirable
and to delegate such power and authority as they consider desirable to any such
Person or Persons.
Q. To indemnify any person with whom the Trust has dealings.
R. To purchase and pay for entirely out of Trust Property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including without limitation, insurance policies insuring the Trust
Property and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers or managers, principal
underwriters, or independent contractors of the Trust individually against all
claims and liabilities of every nature arising by reason of holding, being or
having held any such office or position, or by reason of any action alleged to
have been taken or omitted by any such person as Shareholder, Trustee, officer,
employee, agent, investment adviser or manager, principal underwriter, or
independent contractor, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trust would have the
power to indemnify such Person against such liability.
S. To engage in and to prosecute, defend, compromise, abandon, or
adjust, by arbitration or otherwise, any actions, suits, proceedings, disputes,
claims, and demands relating to the Trust or the Trust Property, and, out of the
Trust Property, to pay or to satisfy any debts, claims or expenses incurred in
connection therewith, including those of litigation, and such power shall
include without limitation the power of the Trustees or any appropriate
committee thereof, in the exercise of their or its good faith business judgment,
consenting to dismiss any action, suit, proceeding, dispute, claims, or demand,
derivative or otherwise, brought by any person, including a Shareholder in such
Shareholder's own name or in the name of the Trust, whether or not the Trust or
any of the Trustees may be named individually therein or the subject matter
arises by reason of business for or on behalf of the Trust.
T. To establish pension, profit sharing, Share purchase, and
other retirement, incentive and benefit plans for any Trustees, officers,
employees and agents of the Trust.
U. To determine and change the fiscal year of the Trust and the
method by which its accounts shall be kept.
V. To establish in their absolute discretion in accordance with
the provisions of applicable law the basis or method for determining the value
of the assets belonging to any class of Shares, the value of the liabilities
belonging to any class of Shares, the allocation of any assets or liabilities to
any class of Shares, the net asset value of any class of Shares, the times at
which Shares of any class shall be deemed to be outstanding or no longer
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outstanding and the net asset value of each Share of any class for purposes of
sales, redemptions, repurchases of Shares or otherwise.
W. To determine in accordance with generally accepted accounting
principles and practices what constitutes net profits or net earnings, and to
determine what accounting periods shall be used by the Trust for any purpose,
whether annual or any other period, including daily; to set apart out of the
assets belonging to any class of Shares such reserves of funds for such purposes
as it shall determine and to abolish the same; to declare and pay any dividends
and distributions to any class of Shares in cash, securities or other property
from any assets legally available therefor, at such intervals (which may be as
frequently as daily) or on such other periodic basis, as it shall determine; to
declare such dividends or distributions by means of a formula or other method of
determination, at meetings held less frequently than the frequency of the
effectiveness of such declaration; to establish payment dates for dividends or
any other distributions on any basis, including dates occurring less frequently
than the effectiveness of declarations thereof; and to provide for the payment
of declared dividends on a date earlier or later than the specified payment date
in the case of Shareholders redeeming their entire ownership of Shares of any
class.
X. To engage in any other lawful act or activity in which a
Massachusetts business trust or a corporation organized under the Massachusetts
Business Corporation Law may engage.
No one dealing with the Trustees shall be under any obligation to
make any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
6.8 TRUSTEES AND REPRESENTATIVES AS SHAREHOLDERS. Any Trustee,
representative or other agent of the Trust may acquire, own and dispose of
Shares of the Trust to the same extent as if he were not a Trustee,
representative or agent; and the Trust may issue and sell or cause to be issued
and sold Shares of the Trust to, and may buy such Shares from, any person with
which such Trustee, representative or agent is affiliated subject only to the
general limitations herein contained as to the sale and purchase of such Shares;
all subject to any restrictions which may be contained in the Regulations.
6.9 EXPENSES; TRUSTEE REIMBURSEMENT. The Trustees shall have the power
to incur and to pay (or shall be reimbursed) from the Trust Property all
expenses and disbursements of the Trust, including, without limitation, interest
expense, compensation payable to Trustees and representatives of the Trust,
taxes, fees and commissions of every kind incurred in connection with the
affairs of the Trust, expenses of issue, repurchase and redemption of Shares,
expenses of registering and qualifying the Trust and its Shares under Federal
and State securities laws and regulations, charges of custodians, transfer
agents, investment advisers, administrators and registrars, expenses of
preparing and printing-and distributing prospectuses, auditing and legal
expenses, expenses of reports to Shareholders, expenses of meetings of
Shareholders and proxy solicitations therefor, insurance expense, association
membership dues and such non-recurring items as may arise, including costs and
expenses of litigation to which the Trust is a party, and for all losses and
liabilities by them incurred in administering the Trust, PROVIDED that
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expenses, disbursements, losses and liabilities incurred in connection with a
class of Shares or in connection with the management of the assets belonging to
such class shall be payable solely out of the assets belonging to such class,
and PROVIDED FURTHER that the Trustees shall have a lien on the Trust Property
prior to any rights or interests of the Shareholders thereto for the payment of
any expenses, disbursements, losses and liabilities of the Trust.
6.10 POWER TO CARRY OUT TRUST'S PURPOSES; PRESUMPTIONS. The Trustees
shall have power to carry out any and all acts consistent with the Trust's
purposes through branches and offices both within and without the Commonwealth
of Massachusetts, in any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, possessions, agencies or instrumentalities of the United States of
America and of foreign governments, and to do all such other things and execute
all such instruments as they deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive. In construing the
provisions of this Declaration, the presumption shall be in favor of a grant of
power to the Trustees. The enumeration of any specific power herein shall not be
construed as limiting the aforesaid power. The Trustees shall not be required to
obtain any court order to deal with the Trust Property.
6.11 DETERMINATIONS BY TRUSTEES. Any determination made in good faith
and, so far as accounting matters are involved in accordance with generally
accepted accounting principles, by or pursuant to the direction of the Trustees
as to the amount and value of assets, obligations or liabilities of the Trust or
any class of Shares, as to the amount of net income of the Trust or any class of
Shares from dividends and interest for any period or amounts at any time legally
available for the payment of dividends, as to the amount of any reserves or
charges set up and the propriety thereof, as to the time of or purpose for
creating reserves or as to the use, alteration or cancellation of any reserves
or charges (whether or not any obligation or liability for which such reserves
or charges shall have been created shall have been paid or discharged or shall
be then or thereafter required to be paid or discharged), as to the value of any
security owned by the Trust or any class of Shares, as to the allocation of any
assets or liabilities to a class or classes of Shares, as to the times at which
Shares of any class shall be deemed to be outstanding or no longer outstanding,
or as to any other matters relating to the issuance, sale, redemption or other
acquisition or disposition of securities or Shares, and any reasonable
determination made in good faith by the Trustees as to whether any transaction
constitutes a purchase of securities on "margin," a sale of securities "short,"
or any underwriting of the sale of, or a participation in any underwriting or
selling group in connection with the public distribution of, any securities,
shall be final and conclusive, and shall be binding upon the Trust and all
Shareholders, past, present and future, and Shares are issued and sold on the
condition and understanding, evidenced by the purchase of Shares or acceptance
of Share certificates, that any and all such determinations shall be binding as
aforesaid.
6.12 SERVICE IN OTHER CAPACITIES. Any Trustee, representative,
employee or agent of the Trust, including any investment adviser, transfer
agent, administrator, distributor, custodian or underwriter for the Trust, may
serve in any other capacity on his or its own behalf or on behalf of others, and
may engage in other business activities in addition to his or its services
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on behalf of the Trust, PROVIDED that such other activities do not materially
interfere with the performance of his or its duties for or on behalf of the
Trust.
VII.
AGREEMENTS WITH INVESTMENT ADVISER,
PRINCIPAL UNDERWRITER, ADMINISTRATOR,
TRANSFER AGENT, CUSTODIAN AND OTHERS
7.1 INVESTMENT ADVISER. The Trustees may, on such terms and conditions
as they may in their discretion determine, enter into a written investment
advisory agreement or agreements with any Person or Persons providing for
portfolio management, investment advisory, statistical and research facilities
and other services pertaining to the assets belonging to one or more classes of
Shares. Notwithstanding any other provision hereof, the Trustees may authorize
such an investment adviser (subject to such general or specific instructions as
the Trustees may adopt) to effect purchases, sales or exchanges of portfolio
securities of such class(es) on behalf of the Trustees and to determine the net
asset value and net income of such class(es) or may authorize any representative
or Trustee to effect such purchases, sales, or exchanges pursuant to the
recommendations of such investment adviser (all without further action by the
Trustees). Any such purchases, sales and exchanges so effected shall be deemed
to have been authorized by all of the Trustees.
7.2 ADMINISTRATOR. The Trustees may, on such terms and conditions as
they may in their discretion determine, enter into one or more agreements with
any Person or Persons providing for administrative services to one or more
classes of Shares, including assistance in supervising the affairs of such
class(es) and performance of administrative, clerical and other services
considered desirable by the Trustees.
7.3 PRINCIPAL UNDERWRITER. The Trustees may, on such terms and
conditions as they may in their discretion determine, enter into one or more
distribution agreements with any Person or Persons providing for the sale of
Shares of one or more classes at a price at least equal to the net asset value
per Share of such class(es) and providing for sale of the Shares of such
class(es) pursuant to arrangements by which the Trust may either agree to sell
the Shares of such class(es) to the other party to the agreement or appoint such
other party its sales agent for such Shares. Such agreement(s) may also provide
for the repurchase of Shares of such class(es) by such other party as principal
or as agent of the Trust, and may authorize the other party to enter into
agreements with others for the purpose of the distribution or repurchase of
Shares of such class(es).
7.4 TRANSFER AGENT. The Trustees may, on such terms and conditions as
they may in their discretion determine, enter into one or more agreements with
any Person or Persons providing for transfer agency and other services to
Shareholders of any class.
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7.5 CUSTODIAN. The Trustees may, on such terms and conditions as they
may in their discretion determine, enter into one or more agreements with any
Person or Persons providing for the custody and safekeeping of the property of
the Trust or any class of Shares.
7.6 SERVICE AND DISTRIBUTION PLANS. The Trustees may, on such terms
and conditions as they may in their discretion determine, adopt one or more
plans pursuant to which Persons may be compensated directly or indirectly by the
Trust for Shareholder servicing, administration or distribution with respect to
one or more classes of Shares, including without limitation plans subject to
Rule 12b-1 under the Act, and the Trustees may enter into agreements pursuant to
such Plans.
7.7 PARTIES TO AGREEMENTS. The same Person may be employed in multiple
capacities under Sections 7.1 through 7.6 of this Article VII and may receive
compensation from the assets belonging to a particular class in as many
capacities in which such persons shall serve such class. The Trustees may enter
into any agreement of the character described in this Article VII with any
Person, including any Person in which any Trustee, representative, employee or
Shareholder of the Trust may be interested, and no such agreement shall be
invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any Person holding such relationship be liable by reason
of such relationship for any loss or expense to the Trust under or by reason of
said agreement or accountable for any profit realized directly or indirectly
therefrom.
VIII.
SHAREHOLDERS' VOTING POWERS AND MEETINGS
8.1 VOTING POWERS. The Shareholders shall have power to vote (a) for
the election of Trustees as provided in Section 6.2 hereof, (b) to the same
extent as the shareholders of a Massachusetts business corporation when
considering whether a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, (c) with respect to any of the matters and to the extent
provided in Article X hereof, (d) with respect to such additional matters
relating to the Trust as may be required by law, by this Declaration of Trust,
the Regulations of the Trust, by any requirement applicable to or agreement of
the Trust, and as the Trustees may consider desirable. Every Shareholder of
record shall have the right to one vote for every whole Share (other than Shares
held in the treasury of the Trust) standing in his name on the books of the
Trust, and to have a proportional fractional vote for any fractional Share, as
to any matter on which the Shareholder is entitled to vote. There shall be no
cumulative voting. Shares may be voted in person or by proxy. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required or permitted to be taken by Shareholders by law, this
Declaration of Trust or the Regulations.
8.2 MEETINGS. Meetings of Shareholders may be called by the Trustees
as provided in the Regulations and shall be called by the Trustees upon the
written request of Shareholders owning at least twenty percent (20%) of the
outstanding Shares entitled to vote.
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8.3 QUORUM AND REQUIRED VOTE. At any meeting of Shareholders a quorum
for the transaction of business shall consist of a majority of the Shares of
each class outstanding and entitled to vote appearing in person or by proxy,
PROVIDED that at any meeting at which the only actions to be taken are actions
required by the Act to be taken by vote of all outstanding Shares of all classes
entitled to vote thereon, irrespective of class, a quorum shall consist of a
majority of the Shares (without regard to class) entitled to vote thereon, and
that at any meeting at which the only actions to be taken shall have been
determined by the Board of Trustees to affect the rights and interests of one or
more but not all classes of outstanding Shares, a quorum shall consist of a
majority of the outstanding Shares of that class or classes so affected,
PROVIDED FURTHER that reasonable adjournments of such meeting until a quorum is
obtained may be made by vote of the Shares present in person or by proxy.
The Trustees shall cause each matter required or permitted to be voted
upon at a meeting or by written consent of Shareholders to be submitted to a
separate vote of each class of outstanding Shares entitled to vote thereon,
PROVIDED that (a) when required by the Act, actions of Shareholders shall be
taken by vote of all outstanding Shares of all classes entitled to vote thereon,
irrespective of class, with all outstanding Shares of all classes voting as a
single class and (b) when the Trustees determine that any matter to be submitted
to a vote of Shareholders affects only the rights or interests of one or more
but not all classes of outstanding Shares, only the Shareholders of the class or
classes so affected will be entitled to vote thereon.
A majority of Shares voting of any class of Shares entitled to vote on
any question shall determine such question, subject to any requirements of the
Act or other applicable law or this Declaration of Trust. In the election of
Trustees, a plurality of Shares voting, irrespective of class, shall elect a
Trustee, to the extent the Act or other applicable law requires that voting
shall be irrespective of class; otherwise, a plurality of each class entitled to
vote shall elect a Trustee.
8.4 SHAREHOLDER ACTION BY WRITTEN CONSENT. Any action which may be
taken by Shareholders may be taken without a meeting if not less than a majority
of the Shareholders entitled to vote on the matter consent to the action in
writing and the written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a vote taken at
a meeting of Shareholders.
8.5 CODE OF REGULATIONS. The Regulations may include further
provisions not inconsistent with this Declaration of Trust for meetings of
Shareholders, votes, record dates, notices of meetings and related matters.
IX.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION
9.1 LIABILITIES OF A CLASS. Liabilities belonging to any class of
Shares, including, without limitation, expenses, fees, charges, taxes, and
liabilities incurred or arising in
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connection with a particular class, or in connection with the management
thereof, shall be paid only from the assets belonging to such class.
9.2 LIMITATION OF TRUSTEE LIABILITY. Every act or thing done or
omitted, and every power exercised or obligation incurred by the Trustees or any
of them in the administration of this Trust or in connection with any affairs,
property or concerns of the Trust, whether ostensibly in their own names or in
their Trust capacity, shall be done, omitted, exercised or incurred by them as
Trustees and not as individuals. Every person contracting or dealing with the
Trustees or having any debt, claim or judgment against them or any of them shall
look only to the funds and property of the Trust for payment or satisfaction. No
Trustee or Trustees of the Trust shall ever 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
Property or the conduct of any of the affairs of the Trust. Every note, bond,
contract, order or other undertaking issued by the Trust or the Trustees
relating to the Trust, and stationery used by the Trust shall include the notice
set forth in Section 9.5 of this Article IX (but the omission thereof shall not
be construed as a waiver of the foregoing provision, and shall not render the
Trustees personally liable).
It is the intention of this Section 9.2 that no Trustee shall be
subject to any personal liability whatsoever to any person for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except that nothing
in this Declaration of Trust shall protect any Trustee from any liability to the
Trust or its Shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of his
duties, or by reason of reckless disregard of his obligations and duties as
Trustee; and that all persons shall look solely to the Trust Property belonging
to a class of Shares for satisfaction of claims of any nature arising in
connection with the affairs of such class of the Trust.
9.3 INDEMNIFICATION OF TRUSTEES, REPRESENTATIVES AND EMPLOYEES. The
Trust shall indemnify each of its Trustees against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as fines
and penalties, and as counsel fees) reasonably incurred by him in connection
with the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which he may be involved or with which he may be
threatened, while as a Trustee or thereafter, by reason of his being or having
been such a Trustee EXCEPT with respect to any matter as to which he shall have
been adjudicated to have acted in bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties, PROVIDED that as to any matter
disposed of by a compromise payment by such person, pursuant to a consent decree
or otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the Trustees to the effect
that if either the matter of willful misfeasance, gross negligence or reckless
disregard of duty, or the matter of bad faith had been adjudicated, it would in
the opinion of such counsel have been adjudicated in favor of such person. The
rights accruing to any person under these provisions shall not exclude any other
right to which he may be lawfully entitled, PROVIDED that no person may satisfy
any right of indemnity or reimbursement hereunder except out of the property of
the Trust. The Trustees may make advance payments in connection with the
indemnification under this Section 9.3, PROVIDED
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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.
9.4 RELIANCE ON EXPERTS, ETC. Each Trustee and representative of the
Trust shall, in the performance of his duties, be fully and completely justified
and protected with regard to any act or any failure to act resulting from
reliance in good faith upon the books of account or other records of the Trust,
upon an opinion of counsel satisfactory to the Trust, or upon reports made to
the Trust by any of its representatives or employees or by the investment
adviser, the principal underwriter, selected dealers, accountants, appraisers or
other experts or consultants selected with reasonable care by the Trustees or
representatives of the Trust, regardless of whether such counsel or expert may
also be a Trustee.
9.5 LIMITATION OF SHAREHOLDER LIABILITY. Shareholders shall not be
subject to any personal liability in connection with the assets of the Trust for
the acts or obligations of the Trust. The Trustees shall have no power to bind
any Shareholder personally or to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay by way of subscription to any Shares or
otherwise. Every obligation, contract, instrument, certificate, Share, other
security of any class of Shares or undertaking, and every other act whatsoever
executed in connection with the Trust or any class of Shares shall be
conclusively presumed to have been executed or done by the executors thereof
only in their capacities as Trustees under the Declaration of Trust or in their
capacity as officers, employees or agents of the Trust and not individually.
Every note, bond, contract, order or other undertaking issued by or on behalf of
the Trust or the Trustees relating to the Trust or any class of Shares, and the
stationery used by the Trust, shall include a recitation limiting the obligation
represented thereby to the Trust and its assets (but the omission of such a
recitation shall not operate to bind any Shareholder), as follows:
"The names 'NCC Funds' and 'Trustees of NCC Funds' refer respectively
to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a
Declaration of Trust dated January , 1986 which is hereby
referred to and a copy of which is on file at the office of the
State Secretary of the Commonwealth of Massachusetts and at the
principal office of the Trust. The obligations of 'NCC Funds'
entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but
in such capacities, and are not binding upon any of the Trustees,
Shareholders or representatives of the Trust personally, but bind
only the Trust Property, and all persons dealing with any class of
shares of the Trust must look solely to the Trust property
belonging to such class for the enforcement of any claims against
the Trust."
The rights accruing to a Shareholder under this Section 9.5 shall not
exclude any other right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any
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appropriate situation even though not specifically provided for herein, PROVIDED
that a Shareholder of any class of Shares shall be indemnified only from assets
belonging to such class.
9.6 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or former
Shareholder shall be held to be personally liable solely by reason of his being
or having been a Shareholder and not because of his acts or omissions or for
some other reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or, in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets belonging to the class(es) of Shares owned by such
Shareholder to be held harmless from and indemnified against all loss and
expense arising from such liability. The Trust shall, upon request by the
Shareholder, assume the defense of any claim made against any Shareholder for
any act or obligations of the Trust and satisfy any judgment thereon from such
assets.
X.
MISCELLANEOUS
10.1 TRUST NOT A PARTNERSHIP. It is hereby expressly declared that a
Massachusetts business trust and not a partnership, joint venture, corporation,
joint stock company or any form of legal relationship other than a trust is
created hereby. Nothing herein shall be construed to make the Shareholders,
either by themselves or with the Trustees, partners or members of a joint stock
association. No Trustee hereunder shall have any power to bind personally either
a representative of the Trust or any Shareholder. All persons extending credit
to, contracting with or having any claim against the Trust or the Trustees shall
look only to the assets of the Trust for payment under such credit, contract or
claim; and neither the Shareholders nor the Trustees, whether past, present or
future, shall be personally liable therefor.
10.2 NO BOND OR SURETY. The Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.
10.3 DURATION OF TRUST. This Trust shall continue without limitation
of time, PROVIDED that the Trust or any class of Shares may be terminated at any
time in accordance with the provisions of this Declaration of Trust and
applicable law.
10.4 MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust may merge
into or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including its good will, upon such terms and conditions and for
such consideration when and as authorized by vote or written consent of the
Trustees and approved by the affirmative vote of the holders of not less than
two-thirds of the Shares outstanding and entitled to vote, voting separately by
class except to the extent that the Act may require voting without regard to
class, or by an instrument or instruments in writing without a meeting consented
to by the holders of not less than two-thirds of such Shares, voting separately
by class except to the extent that the Act may require voting without regard to
class, and by the vote or written consent of the holders of two-thirds of the
Shares of each class of Shares, PROVIDED that if such merger, consolidation,
sale, lease or exchange is recommended by
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the Trustees, such may be approved by a vote of the majority of the outstanding
Shares of each class, voting separately by class.
10.5 INCORPORATION. With the approval of the holders of a majority of
the outstanding Shares, voting separately by class except to the extent that the
Act may require voting without regard to class, the Trustees may cause to be
organized, or assist in organizing, a corporation or corporations under the laws
of any jurisdiction, to carry on any affairs in which the Trust shall directly
or indirectly have any interest, and to transfer the Trust Property to any such
Person in exchange for any Shares or securities thereof or otherwise, and to
lend money to, subscribe for the Shares or securities of, and enter into any
contracts with any such Person in which the Trust holds or is about to acquire
securities or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such Person if
and to the extent permitted by law. Nothing contained herein shall be construed
as requiring approval of Shareholders for the Trustees to organize or assist in
organizing one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the Trust
property to such Person(s).
10.6 FILING OF COPIES, REFERENCES, HEADINGS. The original instrument
of this Declaration of Trust and of each amendment hereto shall be filed with
the State Secretary of the Commonwealth of Massachusetts as provided by law and
copies thereof shall be kept at the office of the Trust where they may be
inspected by any Shareholder. Each amendment so filed shall be accompanied by a
certificate signed and acknowledged by a Trustee or by the Secretary or any
Assistant Secretary of the Trust stating that such action was duly taken in the
manner provided herein, and unless such amendment or such certificate sets forth
some later time for the effectiveness of such amendment, such amendment shall be
effective upon its filing. A restated Declaration of Trust, integrating into a
single instrument all of the provisions of the Declaration of Trust that are
then in effect and operative, may be executed from time to time by a majority of
the Trustees and shall, upon filing with the State Secretary of the Commonwealth
of Massachusetts, be conclusive evidence of all amendments contained therein and
may thereafter be referred to in lieu of the initial Declaration of Trust and
the various amendments thereto. Anyone dealing with the Trust may rely on a
certificate by a representative of the Trust as to whether or not any such
amendment hereto may have been made and as to any matters in connection with the
Trust hereunder, with the same effect as if it were the original, and may rely
on a copy certified by a representative of the Trust to be a copy of this
instrument or of any amendment thereto. Headings are placed herein for
convenience of reference only and in the case of any conflict, the text of this
instrument, rather than the headings, shall control. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original. All signatures to this instrument need not appear on the same page.
10.7 APPLICABLE LAW. The Trust set forth in this instrument is a trust
made in the Commonwealth of Massachusetts and is to be governed by and construed
and administered according to the laws of said Commonwealth.
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<PAGE>
10.8 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
A. No provision of this Declaration of Trust shall be effective
to:
(1) Require a waiver of compliance with any provision of the
Securities Act of 1933, as amended, or the Investment Company Act of 1940, as
amended, or of any valid rule, regulation or order of the Securities and
Exchange Commission thereunder; or
(2) Protect or purport to protect any Trustee or officer of
the Trust against any liability to the Trust or its Shareholders to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
B. The provisions of this Declaration of Trust are severable, and
if the Trustees shall determine with the advice of counsel that any of such
provisions is in conflict with the Act, the regulated investment company
provisions of the Internal Revenue Code, Chapter 182 of the General Laws of the
Commonwealth of Massachusetts or with any other applicable law or regulation,
then in such event the conflicting provision shall be deemed never to have
constituted a part of this Declaration of Trust, PROVIDED that such
determination shall not affect any of the remaining provisions of this
Declaration of Trust or render invalid or improper any action taken or omitted
prior to such determination.
C. If any provision of this Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of this Declaration of Trust in any jurisdiction.
10.9 AMENDMENT OF DECLARATION OF TRUST.
A. This Declaration of Trust may be amended upon a resolution to
that effect being adopted by the Trustees and approved by the affirmative vote
of the holders of not less than a majority of the outstanding Shares, voting
separately by class except to the extent that the Act may require voting without
regard to class.
B. Notwithstanding any other provision hereof, until such time as
a Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration of Trust may be terminated or amended in any respect
by the affirmative vote of a majority of the Trustees.
C. The Trustees may amend this Declaration of Trust without a
vote of Shareholders to change the name of the Trust or to cure any error or
ambiguity or if they deem it necessary to conform this Declaration of Trust to
the requirements of applicable state or federal laws or regulations, including
without limitation the requirements of the regulated investment company
provisions of the Internal Revenue Code, but the Trustees shall not be liable
for failing so to do.
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<PAGE>
D. Notwithstanding any other provision hereof, this Declaration
of Trust may not be amended in any manner whatsoever that would impair the
exemption from personal liability of the Trustees and Shareholders of the Trust
or that would permit an assessment upon any Shareholder.
IN WITNESS WHEREOF, the undersigned has executed this Declaration of
Trust as a Trustee and not individually, as of the 28th day of January, 1986.
-------------------------------
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<PAGE>
NCC FUNDS
Amendment No. 1
to
DECLARATION OF TRUST
I, W. Bruce McConnel, III, do hereby certify as follows:
1. That I am duly elected Secretary of NCC Funds, a Massachusetts
business trust (hereinafter called the "Trust");
2. That in such capacity I have examined records of actions taken
by the Board of Trustees of the Trust;
3. That the existing trustees of the Trust, duly adopted the
following resolutions on September 11, 1987:
RESOLVED, that pursuant to Section 10.9 of the Trust's Declaration of
Trust dated January 28, 1986, Section 8.3 "Quorum and Required Vote," be amended
and restated in its entirety as follows:
"8.3 QUORUM AND REQUIRED VOTE: At any meeting of the
shareholders a quorum for the transaction of business shall
consist of a majority of the Shares of each class outstanding
and entitled to vote appearing in person or by proxy, PROVIDED
that at any meeting at which the only actions to be taken are
actions required by the Act to be taken by vote of all
outstanding shares of all classes entitled to vote thereon,
irrespective of the Shares (without regard to class) entitled
to vote thereon, and that at any meeting at which the only
actions to be taken shall have been determined by the Board of
Trustees to affect the rights of one or more but not all
consist of a majority of the outstanding shares of that class
of classes so affected, PROVIDED FURTHER that reasonable
adjournments of such meeting until a quorum is obtained may be
made by vote of the Shares present in person or by proxy.
The Trustees shall cause each matter required or permitted to
be voted upon at a meeting or by written consent of
Shareholders to be submitted to a vote of all classes of
outstanding Shares entitled to vote thereon (irrespective of
class), unless the Act or other applicable law or regulations
require that the action of the Shareholders be taken by a
separate vote of one or more classes, or the Trustees determine
that any matter to be submitted to a vote of
<PAGE>
Sholderholders affects only the rights or interests of one or
more (but not all) classes of outstanding Shares, in which case
only the Shareholders of the class or classes so affected shall
be entitled to vote thereon.
Unless otherwise required by this Declaration of Trust, the Act
or other applicable law or regulations, a majority of Shares
entitled to vote on any question shall determine such question,
except that in the election of Trustees, a plurality of Shares
voting, irrespective of class, shall elect a Trustee.";
FURTHER RESOLVED, that pursuant to Section 10.9 of the Trust's
Declaration of Trust, Subsection A of Section 10.9 be amended and
restated in its entirety as follows:
"This Declaration of Trust may be amended upon a resolution to
that effect being adopted by the Trustees and approved by the
affirmative vote of the holders of not less than a majority of
the outstanding Shares.";
FURTHER RESOLVED, that the foregoing amendments to the Trust's
Declaration of Trust be submitted to the Trust's Shareholders for
approval, by a separate vote of each class of outstanding Shares, at
the Annual Meeeting of the Shareholders of the Trust to be held on
January 5, 1988; and
FURTHER RESOLVED, that the proper officers of the Trust be, and
hereby are, authorized and directed to execute and file with the
proper Massachusetts state authorities any and all such documents in
the name and on behalf of the Trust, under its seal or otherwise
necessary or required to be filed in connection with the above
amendments, if approved by the Shareholders at the Annual Meeting, and
to do or cause to be done all such other acts and things, as they, or
any of them, may deem necessary or desirable to carry out the intent
or purpose of the foregoing resolutions.
4. That the foregoing changes to the Trust's Declaration of Trust
were duly approved by the Trust's Shareholders at the Annual Meeting of
Shareholders of the Trust held on January 5, 1988; and
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<PAGE>
5. That the foregoing resolutions remain in full force and
effect as of the date hereof.
Dated: 1/8/88 /s/W. Bruce McConnel, III
--------------------------
W. Bruce McConnel, III
Subscribed and sworn to before
Me this 5th day of January 1988
/S/ Darschelle A. Rylander
- --------------------------
Notary Public
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<PAGE>
NCC FUNDS
AMENDMENT NO. 2
TO
DECLARATION OF TRUST
I, W. Bruce McConnel, III, do hereby certify as follows:
1. That I am duly elected Secretary of NCC Funds, a Massachusetts
business trust (hereinafter called the "Trust");
2. That in such capacity I have examined records of actions taken
by the Board of Trustees of the Trust;
3. That the current Trustees of the Trust duly adopted the
following resolutions on March 7, 1995;
CHANGE OF NAME OF TRUST
RESOLVED, that pursuant to Article X, Section 10.9.C of the
Declaration of Trust, the name of the Trust is changed to "Armada
Funds";
FILINGS
FURTHER RESOLVED, that the proper officers of the Trust be,
and hereby are, authorized and directed to execute and file with the
proper Massachusetts state and city authorities any and all such
documents in the name and on behalf of the Trust, under its seal or
otherwise, necessary or required to be filed in connection with the
above amendment, and to do or cause to be done all such other acts and
things, as they, or any of them, may deem necessary or desirable to
carry out the intent or purpose of the foregoing resolution.
4. That the foregoing resolutions remain in full force and effect
as of the date hereof.
<PAGE>
5. That this Amendment No. 2 to the Declaration of Trust shall be
effective on May 22, 1995.
Dated: May 17, 1995
/s/ W. Bruce McConnel, III
--------------------------
W. Bruce McConnel, III
Subscribed to and Sworn to Before
Me this 17th day of May, 1995.
/s/ Georgianna Griffith
- -----------------------
Notary Public
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<PAGE>
CODE OF REGULATIONS
OF
NCC FUNDS
ARTICLE I
TRUSTEES
1.1 NUMBER AND TERM OF OFFICE. The number of Trustees shall be such number,
not less than three (3) nor more than ten (10), as may be fixed from time to
time by the Trustees PROVIDED that if there are no Shares outstanding the number
of Trustees may be less than three (3) but not less than one (1), PROVIDED
FURTHER that if there are Shares outstanding and so long as there are less than
three (3) Shareholders, the number of Trustees may be less than three (3)
Shareholders, the number of Trustees may be less than three (3) but not less
than the number of Shareholders. Each Trustee shall hold office until the next
meeting of the Shareholders following his election or appointment as a Trustee
at which trustees are elected and until his successor shall have been elected
and qualified.
1.2 PLACE OF MEETING; TELEPHONE MEETING. Meetings of the Trustees, regular
or special, shall be held at the principal office of the Trust or at such other
place as the Trustees may from time to time determine. The Trustees or any
committee thereof may participate in a meeting of the Trustees or of such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the conference may hear each
other at the same time and participation by such means shall constitute presence
in person at the meeting.
1.3 REGULAR MEETINGS. Regular meetings of Trustees may be held without
notice at such time and at the principal office of the Trust or at such other
place as the Trustees may from time to time determine.
1.4 SPECIAL MEETINGS. Special meetings of the Trustees may be called by
the President on one day's notice to each Trustee; special meetings of the
Trustees shall be called by
<PAGE>
the President or Secretary in like manner and on like notice on the written
request of three Trustees.
1.5 COMMITTEES. The Trustees may be resolution passed by a majority of the
Trustees appoint among its members an executive committee and other committees
composed of two or more Trustees, and may delegate to such committees, in the
intervals between meetings of the Trustees, any or all of the powers of the
Trustees in the management of the business and affairs of the Trust, except the
power to issue Shares in the Trust or to recommend to Shareholders any action
requiring Shareholders' approval.
1.6 CHAIRMAN OF THE BOARD. The Trustees may at any time appoint one of
their number as Chairman of the Board, who shall serve at the pleasure of the
Trustees and shall perform and execute such duties as the Trustees may from time
to time provide but who shall not by reason of performing or executing these
duties be deemed an officer or employee of the Trust.
1.7 COMPENSATION. Any Trustee, whether or not a salaried officer, employee,
or agent of the Trust, may be compensated for his services as a Trustee or as a
member of a committee, or as Chairman of the Trustees or Chairman of a
committee, by fixed periodic payments or by fees for attendance at meetings or
by both, and in addition may be reimbursed for transportation and other
expenses, all in such manner and amounts as the Trustees may from time to time
determine.
ARTICLE II
SHAREHOLDERS
2.1 MEETINGS. Meetings of the Shareholders of the Trust may be called by
the Trustees and shall be called by the Trustees whenever required by law or
upon the written request of the holders of at least twenty percent (20%) of the
outstanding Shares entitled to vote.
2.2 NOTICE. Written notice, stating the place, day and hour of each meeting
of the Shareholders and the general nature of the business to be transacted
shall be given by, or at the direction of, the person calling the meeting to
each Shareholder of record entitled to vote at the meeting at least ten days
prior to the day named for the meeting, unless in a particular case a longer
period of notice is required by law.
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<PAGE>
2.3 SHAREHOLDERS' LIST. The officer or agent having charge of the transfer
books for Shares of the Trust shall make, at least five days before each meeting
of the Shareholders, a complete list of the Shareholders entitled to vote at the
meeting, arranged in alphabetical order with the address of and the number of
Shares held by each such Shareholder. The list shall be kept on file at the
office of the Trust and shall be subject to inspection by any Shareholders at
any time during usual business hours and shall also be produced and kept open at
the time and place of each meeting of Shareholder and shall be subject to the
inspection of any Shareholder during each meeting of Shareholders.
2.4 RECORD DATE. The Trustees may fix a time (during which they may close
the Share transfer books of the Trust) not more than (50) days prior to the date
of any meeting of the Shareholders, or the date fixed for the payment of any
dividend, or the date of the allotment of rights or the date when any change or
conversion or exchange of Shares shall go into effect, as a record date for the
determination of the Shareholders entitled to notice of, or to vote at, any such
meeting, or entitled to receive payment of any such dividend, or to receive any
such allotment of rights, or to exercise such rights, as the case may be. In
such case, only such Shareholders as shall be Shareholders of record at the
close of business on the date so fixed shall be entitled to notice of, or to
vote at, such meeting or to receive payment of such dividend, or to receive such
allotment rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any Shares on the books of the Trust after any
record date fixed, as aforesaid.
ARTICLE III
NOTICES
3.1 FORM. Notices to the Trustees shall be oral or by telephone or telegram
or in writing delivered personally or mailed to the Trustees at their addresses
appearing on the books of the Trust. Notices to the Shareholders shall be in
writing and delivered personally or mailed to the Shareholders at their
addresses appearing on the books of the Trust. Oral notice shall be deemed to be
given when given directly to the person required to be notified and notice by
mail shall be deemed to be given when deposited in the United States mail or
with a telegraph office for transmission. Notice to the Trustees need not state
the purpose of a regular or special meeting of the Trustees or committee.
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<PAGE>
3.2 WAIVER. Whenever any notice of the time, place or purpose of any
meeting of the Shareholders, the Trustees or a committee is required to be given
under the provisions of Massachusetts law or under the provisions of the
Declaration of Trust or these Regulations, a waiver thereof in writing, signed
by the person or persons entitled to such notice and filed with the records of
the meeting, whether before or after the holding thereof, or actual attendance
at the meeting of the Shareholders in person or by proxy, or at the meeting of
the Trustees or the committee in person, shall be deemed equivalent to the
giving of such notice to such persons.
ARTICLE IV
OFFICERS
4.1 NUMBER. The officers of the Trust shall be chosen by the Trustees and
shall include a President, who shall be a Trustee, a Secretary and a Treasurer.
The Board of Trustees may from time to time elect or appoint one or more Vice
Presidents, Assistant Secretaries and Assistant Treasurers.
4.2 OTHER OFFICERS. The Trustees from time to time may appoint such other
officers and agents as they shall deem advisable, who shall hold their offices
for such terms and shall exercise such powers and perform such duties as the
Trustees may from time to time prescribe. The Trustees may delegate to one or
more officers or agents the power to appoint any such subordinate officers or
agents and to prescribe the respective rights, terms of office, authorities and
duties
4.3 ELECTION AND TENURE. The officers of the Trust shall be chosen by the
Trustees. Two or more officers may be held by the same person but no officer
shall execute, acknowledge or verify any instrument in more than one capacity if
such instrument is required by law, the Declaration of Trust or these
Regulations to be executed, acknowledged or verified by two or more officers.
Any officer or agent may be removed by the Trustees. An officer of the Trust may
resign by filing a written resignation with the President or with the Trustees
or with the Secretary. Any vacancy occurring in any office of the Trust by
death, resignation, removal or otherwise may be filled by the Trustees.
-4-
<PAGE>
4.4 COMPENSATION. The salaries or other compensation of all officers and
agents of the Trust shall be fixed by the Trustees, except that the Trustees may
delegate to any committee the power to fix the salary or other compensation of
any officer of the Trust.
4.5 PRESIDENT. The President shall be the chief executive officer of the
Trust; he shall preside at all meetings of the Trustees and of the Shareholders
unless a Chairman has been designated; he shall be, EX OFFICIO, a member of all
standing committees; and he shall see that all orders and resolutions of the
Trustees are carried into effect. He, or such person as he may designate, shall
sign, execute and acknowledge, in the name of the Trust, deeds, mortgages,
bonds, contracts and other instruments authorized by the Trustees, except in the
case where the signing and execution thereof shall be delegated by the Trustees
to some other officer or agent of the Trust. The President shall also be the
chief administrative officer of the Trust and shall perform such other duties
and shall have such other powers as the Trustees may from time to time
prescribe.
4.6 VICE PRESIDENTS. The Vice Presidents, in the order of their seniority,
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President, and shall perform such other duties as the
Trustees may from time to time prescribe.
4.7 SECRETARY. The Secretary shall attend all meetings of the Trustees and
of the Shareholders and shall record all the proceedings thereof and shall
perform like duties for any committee when required. He shall give, or cause to
be given, notice of meetings of the Trustees and of the Shareholders, and shall
perform such other duties as may be prescribed by the Trustees or the President,
under whose supervision he shall be. He shall keep in safe custody the seal of
the Trust and, when authorized by the Trustees, affix and attest the same to any
instrument requiring it, provided that, in lieu of affixing the seal of the
Trust to any document, it shall be sufficient to meet the requirements of any
law, rule or regulation relating to a seal to affix the word "(SEAL)" adjacent
to the signature of the authorized officer of the Trust. The Trustees may give
general authority to any other officer to affix the seal of the Trust and to
attest the affixing by his signature.
-5-
<PAGE>
4.8 ASSISTANT SECRETARIES. The Assistant Secretaries, in order of their
seniority, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary and shall perform such other
duties as the Trustees may from time to time prescribe.
4.9 TREASURER. The Treasurer shall be the chief financial officer of the
Trust. He shall be responsible for the maintenance of its accounting records and
shall render to the Trustees when the Trustees so require an account of all the
Trust's financial transactions and a report of the financial condition of the
Trust.
4.10 ASSISTANT TREASURERS. The Assistant Treasurers, in the order of their
seniority, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties as the Trustees may from time to time prescribe.
ARTICLE V
INVESTMENT RESTRICTIONS
The Trustees may from time to time adopt such restrictions upon the
investment of the assets of the Trust, or amendments thereto, as they may
consider necessary or desirable, PROVIDED that any such restriction or amendment
shall be approved by a majority of the outstanding Shares of the Trust entitled
to vote thereon if required by the Investment Company Act of 1940, as amended.
ARTICLE VI
GENERAL PROVISIONS
6.1 INSPECTION OF BOOKS. The Trustees may from time to time determine
whether and to what extent, and at what time and places, and under what
conditions and regulations the accounts and books of the Trust or any of them
shall be open to the inspections of the Shareholders; and no Shareholder shall
have any right of inspecting any account or book or document of the Trust except
as conferred by law or authorized by the Trustees or by resolution of the
Shareholders.
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<PAGE>
6.2 REPORTS. The Trust shall transmit to the Shareholders and/or file with
federal and state regulatory agencies such reports of its operations as the
Trustees shall consider necessary or desirable or as may be required by law.
6.3 BONDING OF OFFICERS AND EMPLOYEES. All officers and employees of the
Trust shall be bonded to such extent, and in such manner, as may be required by
law.
6.4 TRANSFER OF SHARES. Transfer of Shares shall be made on the books of
the Trust at the direction of the person named on the Trust's books or named in
the certificates for such Shares (if issued), or by his attorney lawfully
constituted in writing, and upon surrender of the certificate or certificates
for such Shares (if issued) properly endorsed, together with a proper request
for redemption, to the Trust's transfer agent, with such evidence of the
authenticity of such transfer, authorization and other matters as the Trust or
its agents may reasonably require, and subject to such other reasonable
conditions and requirements as may be required by the Trust or its agents; or if
the Trustees shall by resolution so provide, transfer of Shares may be made in
any other manner provided by law.
ARTICLE VII
AMENDMENTS
This Code of Regulations may be altered or repealed by the Trustees at any
regular or special meeting of the Trustees.
-7-
<PAGE>
NCC FUNDS
AMENDMENT NO. 1 TO THE CODE OF REGULATIONS
RESOLVED, that Article II, Section 2.1 of the Trust's Code of
Regulations be, and the same hereby is, amended and restated in its entirety as
follows:
"2.1 MEETINGS. Meetings of the Shareholders of the Trust may be called
by the Trustees and shall be called by the Trustees whenever required by law or
upon the written request of the holders of at least ten percent (10%) of the
outstanding Shares entitled to vote."
<PAGE>
CUSTODIAN SERVICES AGREEMENT
This Agreement is made as of November 7, 1994 by and between
NATIONAL CITY BANK (the "Custodian") and NCC FUNDS, a Massachusetts business
trust (the "Fund").
The Fund is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund
wishes to retain the Custodian to provide custodian services to each of its
investment portfolios, as listed on Exhibit A attached hereto and as such
Exhibit A may be amended from time to time (the "Portfolios"), and the Custodian
wishes to furnish custodian services, either directly or though an affiliate or
affiliates, as more fully described herein.
In consideration of the promises and mutual covenants herein
contained, the parties agree as follows:
1. DEFINITIONS.
(a) "AUTHORIZED PERSON" shall mean any officer of the Fund
and any other person, who is duly authorized by the Fund's Board of Trustees, to
give Oral and Written Instructions on behalf of the Fund. Such persons are
listed in the Certificate attached hereto as the Authorized Persons Appendix as
such appendix may be amended in writing by the Fund's Board of Trustees from
time to time.
(b) "BOOK-ENTRY SYSTEM" shall mean Federal Reserve Treasury
book-entry system for United States and federal agency securities, its successor
or successors, and its nominee or nominees and any book-entry system maintained
by an exchange registered with the SEC under the 1934 Act.
(c) "CFTC" shall mean the Commodities Futures Trading
Commission.
(d) "ORAL INSTRUCTIONS" shall mean oral instructions
received by the Custodian from an Authorized Person or from a person reasonably
believed by the Custodian to be an Authorized Person.
(e) "CUSTODIAN" shall mean National City Bank or a
subsidiary or affiliate of National City Bank.
(f) "SEC" shall mean the Securities and Exchange Commission.
(g) "SECURITIES AND COMMODITIES LAWS" shall mean the
Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange Act
of 1934, as amended (the
-1-
<PAGE>
"1934 Act"), the 1940 Act, and the Commodities Exchange Act, as amended (the
"CEA").
(h) "SHARES" shall mean the units of beneficial interest of
the Fund.
(i) "PROPERTY" shall mean:
(i) any and all securities and other investment items
which the Fund may from time to time deposit, or
cause to be deposited, with the Custodian or which
the Custodian may from time to time hold for any
Portfolio;
(ii) all income in respect of any of such securities or
other investment items;
(iii) all proceeds of the sale of any of such securities
or investment items; and
(iv) all proceeds of the sale of securities issued by
the Fund, which are received by the Custodian from
time to time, from or on behalf of the Fund.
(j) "WRITTEN INSTRUCTIONS" shall mean written instructions
signed by one Authorized Person and received by the Custodian. The instructions
may be delivered by hand, mail, tested telegram, cable, telex or facsimile
sending device.
2. APPOINTMENT. The Fund hereby appoints the Custodian to provide
custodian services to each of the Portfolios, and the Custodian accepts such
appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where
applicable, will provide the Custodian with the following:
(a) certified or authenticated copies of the resolutions of
the Fund's Board of Trustees, approving the appointment
of the Custodian or its affiliates to provide services;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of each Portfolio's advisory agreement or
agreements;
(d) a copy of each Portfolio's distribution agreement or
agreements;
(e) a copy of each Portfolio's transfer agency agreement or
-2-
<PAGE>
agreements;
(f) copies of any shareholder servicing agreements made in
respect of the Fund or any Portfolio; and
(g) certified or authenticated copies of any and all
amendments or supplements to the foregoing.
4. COMPLIANCE WITH GOVERNMENT RULES AND REGULATIONS. The
Custodian undertakes to comply with all applicable requirements of the 1933 Act,
the 1934 Act, the 1940 Act, and the CEA, and any laws, rules and regulations of
governmental authorities having jurisdiction with respect to all duties to be
performed by the Custodian hereunder. Except as specifically set forth herein,
the Custodian assumes no responsibility for such compliance by the Fund.
5. INSTRUCTIONS. Unless otherwise provided in this Agreement, the
Custodian shall act only upon Oral and Written Instructions. The Custodian shall
be entitled to rely upon any Oral and Written Instructions it receives from an
Authorized Person (or from a person reasonably believed by the Custodian to be
an Authorized Person) pursuant to this Agreement. The Custodian may assume that
any Oral or Written Instructions received hereunder are not in any way
inconsistent with the provisions of organizational documents of the Fund or of
any vote, resolution or proceeding of the Fund's Board of Trustees or of the
Fund's shareholders.
The Fund agrees to forward to the Custodian Written Instructions
confirming Oral Instructions so that the Custodian receives the Written
Instructions by the close of business on the same day that such Oral
Instructions are received. The fact that such confirming Written Instructions
are not received by the Custodian shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral Instructions.
The Fund further agrees that the Custodian shall incur no liability
to the Fund or any Portfolio in acting upon Oral or Written Instructions
provided such instructions reasonably appear to have been received from an
Authorized Person.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE FUND. If the Custodian is in doubt as to
any action it should or should not take, the Custodian may request directions or
advice, including Oral or Written Instructions, from the Fund.
(b) ADVICE OF COUNSEL. If the Custodian shall be in doubt as
to any questions of law pertaining to any action it should or should not take,
the Custodian may request advice at its own cost from such counsel of its own
choosing (who may be counsel for the Fund, the Fund's adviser or the Custodian,
at the option of the Custodian).
-3-
<PAGE>
(c) CONFLICTING ADVICE. In the event of a conflict between
directions, advice or Oral or Written Instructions the Custodian receives from
the Fund, and the advice it receives from counsel, the Custodian shall be
entitled to rely upon and follow the advice of counsel.
(d) PROTECTION OF THE CUSTODIAN. The Custodian shall be
protected in any action it takes or does not take in reliance upon directions,
advice or Oral or Written Instructions it receives from the Fund or from counsel
and which the Custodian believes, in good faith, to be consistent with those
directions, advice or Oral or Written Instructions.
Nothing in this paragraph shall be construed so as to impose an
obligation upon the Custodian (i) to seek such directions, advice or Oral or
Written Instructions, or (ii) to act in accordance with such directions, advice
or Oral or Written Instructions unless, under the terms of other provisions of
this Agreement, the same is a condition of the Custodian's properly taking or
not taking such action.
7. RECORDS. The books and records pertaining to the Fund and the
Portfolios, which are in the possession of the Custodian, shall be the property
of the Fund. Such books and records shall be prepared and maintained as required
by the 1940 Act and other applicable securities laws, rules and regulations. The
Fund, or the Fund's authorized representatives, shall have access to such books
and records at all times during the Custodian's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and records shall be
provided by the Custodian to the Fund or to an authorized representative of the
Fund, at the Fund's expense.
8. CONFIDENTIALITY. The Custodian agrees to keep confidential all
records of the Fund and the Portfolios and information relative to the Fund, the
Portfolios and the shareholders (past, present and potential), unless the
release of such records or information is otherwise consented to, in writing, by
the Fund. The Fund further agrees that, should the Custodian be required to
provide such information or records to duly constituted authorities (who may
institute civil or criminal contempt proceedings for failure to comply), the
Custodian shall not be required to seek the Fund's consent prior to disclosing
such information; provided that the Custodian gives the Fund prior written
notice of the provision of such information and records.
9. COOPERATION WITH ACCOUNTANTS. The Custodian shall cooperate
with the Fund's independent public accountants and shall take all reasonable
action in the performance of its obligations under this Agreement to ensure that
the necessary information is made available to such accountants for the
expression of their opinion, as required by the Fund.
10. DISASTER RECOVERY. The Custodian shall enter into and shall
maintain in effect with appropriate parties one or more agreements making
reasonable provision for emergency use of electronic data processing equipment
to the extent appropriate equipment is
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<PAGE>
available. In the event of equipment failures, the Custodian shall, at no
additional expense to the Fund, take reasonable steps to minimize service
interruptions but shall have no liability with respect thereto unless such
failures result from the Custodian's own willful misfeasance, bad faith, gross
negligence, negligence or reckless disregard of its duties and obligations under
this Agreement.
11. COMPENSATION. As compensation for custody services rendered by
the Custodian during the term of this Agreement, the Fund will pay to the
Custodian a fee or fees as may be agreed to in writing from time to time by the
Fund and the Custodian.
12. INDEMNIFICATION. The Fund, on behalf of each of the
Portfolios, 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 Fund 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 Fund, 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 Fund or
any Portfolio 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 Portfolio or the Fund shall be security therefor.
13. RESPONSIBILITY OF THE CUSTODIAN. The Custodian shall be under
no duty to take any action on behalf of the Fund except as specifically set
forth herein or as may be specifically agreed to by the Custodian, in writing.
The Custodian shall be obligated to exercise care and diligence in the
performance of its duties hereunder, to act in good faith and to use its best
efforts, within reasonable limits, in performing Services provided for under
this Agreement. The Custodian shall be responsible for its own or its nominees'
(including without limitation foreign sub-custodians approved by the Fund) own
willful misfeasance, bad faith, negligence or reckless disregard of its duties
and obligations under this Agreement or the Custodian's own negligent failure to
perform its duties under this Agreement. Notwithstanding the foregoing, the
Custodian shall not be responsible for losses beyond its control, provided that
the Custodian has acted in accordance with the standard of care set forth above;
and provided further that the Custodian shall only be responsible for that
portion of losses or damages suffered by the Fund or
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<PAGE>
any Portfolio attributable to the negligence of the Custodian.
Without limiting the generality of the foregoing or of any other
provision of this Agreement, the Custodian, in connection with its duties under
this Agreement, shall not be under any duty or obligation to inquire into and
shall not be liable for (a) the validity or invalidity or authority or lack
thereof of any Oral or Written Instruction, notice or other instrument which
conforms to the applicable requirements of this Agreement, and which the
Custodian reasonably believes to be genuine; or (b) delays or errors or loss of
data occurring by reason of circumstances beyond the Custodian's control,
including acts of civil or military authority, national emergencies, fire, flood
or catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply, nor shall the Custodian be under
any duty or obligation to ascertain whether any Property at any time delivered
to or held by the Custodian may properly be held by or for the Fund or any
Portfolio. Notwithstanding the foregoing, the Custodian shall use its best
efforts to mitigate the effects of the events in clause (b) above, although such
efforts shall not impute any liability thereto.
14. DESCRIPTION OF SERVICES.
(a) DELIVERY OF THE PROPERTY. The Fund will deliver or
arrange for delivery to the Custodian, all the property it owns, including cash
received as a result of the distribution of its Shares, during the period that
is set forth in this Agreement. The Custodian will not be responsible for such
property until actual receipt.
(b) RECEIPT AND DISBURSEMENT OF MONEY. The Custodian, acting
upon Written Instructions, shall open and maintain a separate account in the
name of the Fund on behalf of each Portfolio using all cash received from or for
the account of any Portfolio, subject to the terms of this Agreement.
The Custodian shall make cash payments to or from the accounts of a
Portfolio only for:
(i) purchases of securities in the name of a Portfolio
or the Custodian or the Custodian's nominee as
provided in sub-paragraph j and for which the
Custodian has received a copy of the broker's or
dealer's confirmation or payee's invoice, as
appropriate;
(ii) purchase or redemption of Shares of the Fund
delivered to the Custodian;
(iii) payment of, subject to Written Instructions,
interest, dividends, taxes, administration,
accounting, distribution, advisory, management
fees or similar expenses which are
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<PAGE>
to be borne by the Fund or any Portfolio;
(iv) payment to, subject to receipt of Written
Instructions, the Fund's transfer agent, as agent
for the shareholders, an amount equal to the
amount of dividends and distributions stated in
the Written Instructions to be distributed in cash
by the transfer agent to shareholders, or, in lieu
of paying the Fund's transfer agent, the Custodian
may arrange for the direct payment of cash
dividends and distributions to shareholders in
accordance with procedures mutually agreed upon
from time to time by and among the Fund, the
Custodian and the Fund's transfer agent;
(v) payments, upon receipt of Written Instructions, in
connection with the conversion, exchange or
surrender of securities owned or subscribed to by
a Portfolio and held by or delivered to the
Custodian;
(vi) payments of the amounts of dividends received with
respect to securities sold short;
(vii) payments made to a sub-custodian pursuant to
provisions in sub-paragraph c of this Paragraph
14; and
(viii) payments, upon Written Instructions made for
other proper Fund purposes.
The Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received as custodian
for the account of the Fund or any Portfolio.
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<PAGE>
(c) RECEIPT OF SECURITIES.
(i) The Custodian shall hold all securities and non
cash property received by it for the account of a
Portfolio in a separate account that physically
segregates such securities from those of any other
Portfolio, persons, firms or corporations. All
such securities and property shall be held or
disposed of only upon Written Instructions of the
Fund pursuant to the terms of this Agreement. The
Custodian shall have no power or authority to
withdraw, deliver, assign, hypothecate, pledge or
otherwise dispose of any such securities or
investment, except upon the express terms of this
Agreement and upon Written Instructions,
accompanied by a certified resolution of the
Fund's Board of Trustees, authorizing the
transaction. In no case may any member of the
Fund's Board of Trustees, or any officer, employee
or agent of the Fund withdraw any securities.
At the Custodian's own expense and for its own
convenience, the Custodian may enter into
sub-custodian agreements with other United States
banks or trust companies to perform duties
described in this sub-paragraph c. Such bank or
trust company shall have an aggregate capital,
surplus and undivided profits, according to its
last published report, of at least one million
dollars ($1,000,000), if it is a subsidiary or
affiliate of the Custodian, or at least twenty
million dollars ($20,000,000) if such bank or
trust company is not a subsidiary or affiliate of
the Custodian. In addition, the Fund may authorize
the Custodian to employ one or more sub-custodians
for the Fund's securities and other assets
maintained outside the United States. Any such
domestic or foreign sub-custodian must be
qualified to act as custodian and agree to comply
with the relevant provisions of the 1940 Act and
applicable rules and regulations. No such
arrangement will be entered into without prior
written approval of the Fund.
The Custodian shall remain responsible for the
performance of all of its duties as described in
this Agreement and shall be liable to the Fund
for, and shall indemnify and hold the Fund and
each Portfolio harmless from, its own acts or
omissions and those of any domestic or foreign
sub-custodian, under the standards of care
provided for herein.
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<PAGE>
The Fund may appoint or request the Custodian to
appoint certain sub-custodians with respect to
(including but not limited to) the facilitation of
three party repurchase agreements. In such an
event, the Custodian shall not be responsible for
the performance or actions and omissions of any
such sub-custodian.
(d) TRANSACTIONS REQUIRING INSTRUCTIONS. Upon receipt of
Oral or Written Instructions and not otherwise, the Custodian, directly or
through the use of the Book-Entry System, shall:
(i) deliver any securities held for a Portfolio
against the receipt of payment for the sale of
such securities;
(ii) execute and deliver to such persons as may be
designated in such Oral or Written Instructions,
proxies, consents, authorizations, and any other
instruments whereby the authority of any Portfolio
as owner of any securities may be exercised;
(iii) deliver any securities to the issuer thereof, or
its agent, when such securities are called,
redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(iv) deliver any securities held for a Portfolio
against receipt of other securities or cash issued
or paid in connection with the liquidation,
reorganization, refinancing, tender offer, merger,
consolidation or recapitalization of any
corporation, or the exercise of any conversion
privilege;
(v) deliver any securities held for a Portfolio to any
protective committee, reorganization committee or
other person in connection with the
reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets
of any corporation, and receive and hold under the
terms of this Agreement such certificates of
deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such
delivery;
(vi) make such transfer or exchanges of the assets of
the Fund and take such other steps as shall be
stated in said Oral or
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<PAGE>
Written Instructions to be for the purpose of
effectuating a duly authorized plan of
liquidation, reorganization, merger, consolidation
or recapitalization of the Fund;
(vii) release securities belonging to a Portfolio to any
bank or trust company for the purpose of a pledge
or hypothecation to secure any loan incurred by a
Portfolio; provided, however, that securities
shall be released only upon payment to the
Custodian of the monies borrowed, except that in
cases where additional collateral is required to
secure a borrowing already made subject to proper
prior authorization, further securities may be
released for that purpose; and repay such loan
upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the
note or notes evidencing the loan;
(viii) release and deliver securities owned by a
Portfolio in connection with any repurchase
agreement entered into on behalf of the Fund,
but only on receipt of payment therefor; and
pay out moneys of such Portfolio in connection
with such repurchase agreements, but only upon
the delivery of the securities;
(ix) release and deliver or exchange securities owned
by a Portfolio in connection with any conversion
of such securities, pursuant to their terms, into
other securities;
(x) release and deliver securities owned by a
Portfolio for the purpose of redeeming in kind
shares of the Fund upon delivery thereof to the
Custodian; and
(xi) release and deliver or exchange securities owned
by a Portfolio for other corporate purposes.
The Custodian must also receive a certified
resolution describing the nature of the corporate
purpose and the name and address of the person(s)
to whom delivery shall be made when such action is
pursuant to sub-paragraph d.
(e) USE OF BOOK-ENTRY SYSTEM. The Fund shall deliver to the
Custodian certified resolutions of the Fund's Board of Trustees approving,
authorizing and instructing the Custodian on a continuous and on-going basis, to
deposit in the Book-Entry System all securities belonging to a Portfolio
eligible for deposit therein and to utilize the Book-
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<PAGE>
Entry System to the extent possible in connection with settlements of purchases
and sales of securities by the Portfolios, and deliveries and returns of
securities loaned, subject to repurchase agreements or used as collateral in
connection with borrowings. The Custodian shall continue to perform such duties
until it receives Written or Oral Instructions authorizing contrary actions(s).
To administer the Book-Entry System properly, the following
provisions shall apply:
(i) With respect to securities of the Fund which are
maintained in the Book-Entry system, established
pursuant to this sub-paragraph e hereof, the
records of the Custodian shall identify by
Book-Entry or otherwise those securities belonging
to each Portfolio. The Custodian shall furnish the
Fund a detailed statement of the Property held for
each Portfolio under this Agreement at least
monthly and from time to time and upon written
request.
(ii) Securities and any cash of each Portfolio
deposited in the Book-Entry System will at all
times be segregated from any assets and cash
controlled by the Custodian in other than a
fiduciary or custodian capacity but may be
commingled with other assets held in such
capacities. The Custodian and its sub-custodian,
if any, will pay out money only upon receipt of
securities and will deliver securities only upon
the receipt of money.
(iii) All books and records maintained by the Custodian
which relate to the Fund's participation in the
Book-Entry System will at all times during the
Custodian's regular business hours be open to the
inspection of the Fund's duly authorized employees
or agents, and the Fund will be furnished with all
information in respect of the services rendered to
it as it may require.
(iv) The Custodian will provide the Fund with copies of
any report obtained by the Custodian on the system
of internal accounting control of the Book-Entry
System promptly after receipt of such a report by
the Custodian.
The Custodian will also provide the Fund with such reports on its own
system of internal control as the Fund may reasonably request from time to time.
(f) REGISTRATION OF SECURITIES. All Securities held for a
Portfolio which
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<PAGE>
are issued or issuable only in bearer form, except such securities held in the
Book-Entry System, shall be held by the Custodian in bearer form; all other
securities held for a Portfolio may be registered in the name of the Fund on
behalf of a Portfolio, the Custodian, the Book-Entry System, a sub-custodian, or
any duly appointed nominees of a Portfolio, the Custodian, Book-Entry system or
sub-custodian. The Fund reserves the right to instruct the Custodian as to the
method of registration and safekeeping of the securities of a Portfolio. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register its
registered nominee or in the name of the Book-Entry System, any securities which
it may hold for the account of any Portfolio and which may from time to time be
registered in the name of the Fund on behalf of a Portfolio. The Custodian shall
hold all such securities which are not held in the Book-Entry System in a
separate account for each Portfolio in the name of the Fund on behalf of the
relevant Portfolio physically segregated at all times from those of any other
person or persons.
(g) VOTING AND OTHER ACTION. Neither the Custodian nor its
nominee shall vote any of the securities held pursuant to this Agreement by or
for the account of any Portfolio, except in accordance with Written
Instructions. The Custodian, directly or through the use of the Book-Entry
System, shall execute in blank and promptly deliver all notice, proxies, and
proxy soliciting materials to the registered holder of such securities. If the
registered holder is not the Fund on behalf of a Portfolio, then Written or Oral
Instructions must designate the person who owns such securities.
(h) TRANSACTIONS NOT REQUIRING INSTRUCTIONS. In the absence
of contrary Written Instructions, the Custodian is authorized to take the
following actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account of each
Portfolio, all income, dividends,
distributions, coupons, option premiums,
other payments and similar items, included
or to be included in the Property, and, in
addition, promptly advise the Fund of such
receipt and credit such income, as
collected, to the Portfolio's custodian
account;
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<PAGE>
(B) endorse and deposit for collection, in the
name of each Portfolio, checks, drafts, or
other orders for the payment of money;
(C) receive and hold for the accounts of each
Portfolio all securities received as a
distribution on that Portfolio's portfolio
securities as a result of a stock dividend,
share split-up or reorganization,
recapitalization, readjustment or other
rearrangement or distribution of rights or
similar securities issued with respect to
any portfolio securities belonging to a
Portfolio held by the Custodian hereunder;
(D) present for payment and collect the amount
payable upon all securities which may mature
or be called, redeemed or retired, or
otherwise become payable on the date such
securities become payable; and
(E) take any action which may be necessary and
proper in connection with the collection and
receipt of such income and other payments
and the endorsement for collection of
checks, drafts, and other negotiable
instruments.
(ii) MISCELLANEOUS TRANSACTIONS.
(A) The Custodian is authorized to deliver or
cause to be delivered Property against
payment or other consideration or written
receipt therefor, in the following cases:
(1) for examination by a broker or
dealer selling for the account
of a Portfolio in accordance
with street delivery custom;
(2) for the exchange of interim
receipts or temporary securities
for definitive securities; and
(3) for transfer of securities into
name of the Fund on behalf of a
Portfolio or the Custodian or
nominee of either, or for
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<PAGE>
exchange of securities for a
different number of bonds,
certificates, or other evidence,
representing the same aggregate
face amount or number of units
bearing the same interest rate,
maturity date and call
provisions, if any, provided
that, in any such case, the new
securities are to be delivered
to the Custodian.
(B) Unless and until the Custodian receives Oral
or Written instructions to the contrary, the
Custodian shall:
(1) pay all income items held by it
which call for payment upon
presentation and hold the cash
received by it upon such payment
for the account of each
Portfolio;
(2) collect interest and cash
dividends received, with notice
to the Fund, to the account of
each Portfolio;
(3) hold for the account of each
Portfolio all stock dividends,
rights and similar securities
issued with respect to any
securities held by the
Custodian; and
(4) execute as agent on behalf of
the Fund all necessary ownership
certificates required by the
Internal Revenue Code or the
Income Tax Regulations of the
United States Treasury
Department or under the laws of
any State now or hereafter in
effect, inserting the Fund's
name on behalf of any Portfolio
on such certificate as the owner
of the securities covered
thereby, to the extent it may
lawfully do so.
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<PAGE>
(i) SEGREGATED ACCOUNTS.
(i) The Custodian shall upon receipt of Written
or Oral Instructions establish and maintain
segregated accounts on its records for and
on behalf of each Portfolio. Such accounts
may be used to transfer cash and securities,
including securities in the Book-Entry
System:
(A) for the purposes of compliance by the Fund
with the procedures required by a securities
or option exchange, providing such
procedures comply with the 1940 Act and any
releases of the SEC relating to the
maintenance of segregated accounts by
registered investment companies; and
(B) Upon receipt of Written Instructions, for
other proper corporate purposes.
(ii) The Custodian may enter into separate
custodial agreements with various futures
commission merchants ("FCMs") that the Fund
uses (each an "FCM Agreement"), pursuant to
which the Fund's margin deposits in any
transactions involving futures contracts and
options on futures contracts will be held by
the Custodian in accounts (each an "FCM
Account") subject to the disposition by the
FCM involved in such contracts in accordance
with the customer contract between FCM and
the Fund ("FCM Contract"), SEC rules
governing such segregated accounts, CFTC
rules and the rules of the applicable
commodities exchange. Such FCM Agreements
shall only be entered into upon receipt of
Written Instructions from the Fund which
state that (i) a customer agreement between
the FCM and the Fund has been entered into;
and (ii) the Fund is in compliance with all
the rules and regulations of the CFTC.
Transfers of initial margin shall be made
into an FCM Account only upon Written
Instructions; transfers of premium and
variation margin may be made into an FCM
Account pursuant to Oral Instructions.
Transfers of funds from an FCM Account to
the FCM for which the Custodian holds such
an account may only occur upon certification
by the FCM to the Custodian that pursuant to
the FCM Agreement and the FCM Contract, all
conditions precedent to its right to give
the Custodian such instruction have been
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<PAGE>
satisfied.
(j) PURCHASES OF SECURITIES. The Custodian shall settle
purchased securities upon receipt of Oral or Written Instructions from the Fund
or its investment adviser(s) that specify:
(i) the name of the issuer and the title of the
securities, including CUSIP number if applicable;
(ii) the number of shares or the principal amount
purchased and accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase;
(vi) the name of the person from whom or the broker
through whom the purchase was made. The Custodian
shall upon receipt of securities purchased by or
for a Portfolio pay out of the moneys held for the
account of a Portfolio the total amount payable to
the person from whom or the broker through whom
the purchase was made, provided that the same
conforms to the total amount payable as set forth
in such Oral or Written Instructions; and
(vii) the name of the Portfolio involved.
(k) SALES OF SECURITIES. The Custodian shall settle sold
securities upon receipt of Oral or Written Instructions from the Fund that
specify:
(i) the name of the issuer and the title of the
security, including CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and
accrued interest, if any;
(iii) the date of trade and settlement and sale;
(iv) the sale price per unit;
(v) the total amount payable to the Portfolio upon
such sale;
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<PAGE>
(vi) the name of the broker through whom or the person
to whom the sale was made;
(vii) the location to which the security must be
delivered and delivery deadline, if any; and
(viii) the name of the Portfolio involved.
The Custodian shall deliver the securities upon receipt of the total
amount payable to the Portfolio upon such sale, provided that the total amount
payable is the same as was set forth in the Oral or Written Instructions.
Subject to the foregoing, the Custodian may accept payment in such form as shall
be satisfactory to it, and may deliver securities and arrange for payment in
accordance with the customs prevailing among dealers in securities.
(l) REPORTS.
(i) The Custodian shall furnish the Fund the following
reports:
(A) such periodic and special reports as the Fund may
reasonably request;
(B) a monthly statement summarizing all transactions
and entries for the account of each Portfolio,
listing the portfolio securities belonging to each
Portfolio with the adjusted average cost of each
issue and stating the cash account of each
Portfolio including disbursements;
(C) the reports to be furnished to the Fund pursuant
to Rule l7f-4; and
(D) such other information as may be agreed upon from
time to time between the Fund and the Custodian.
(ii) The Custodian shall transmit promptly to the Fund
any proxy statement, proxy material, notice of a
call or conversion or similar communication
received by it as custodian of the Property. The
Custodian shall be under no other obligation to
inform the Fund as to such actions or events.
(m) COLLECTIONS. All collections of monies or other property
in respect, or which are to become part, of the Property (but not the
safekeeping thereof upon receipt by the
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<PAGE>
Custodian) shall be at the sole risk of the Fund. If payment is not received by
the Custodian within a reasonable time after proper demands have been made, the
Custodian shall notify the Fund in writing, including copies of all demand
letters, any written responses, memoranda of all oral responses and telephonic
demands thereto, and await instructions from the Fund. The Custodian shall not
be obliged to take legal action for collection unless and until reasonably
indemnified to its satisfaction. The Custodian shall also notify the Fund as
soon as reasonably practicable whenever income due on securities is not
collected in due course and shall provide the Fund with periodic status reports
of such income uncollected after a reasonable time.
15. DURATION AND TERMINATION. This Agreement shall continue until
terminated by the Fund or by the Custodian on sixty (60) days' prior written
notice to the other party. In the event this Agreement is terminated (pending
appointment of a successor to the Custodian or vote of the shareholders of the
Fund to dissolve or to function without a custodian of its cash, securities or
other property), the Custodian shall not deliver cash, securities or other
property of the Portfolios to the Fund. It may deliver them to a bank or trust
company of the Custodian's choice, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
twenty million dollars ($20,000,000), as a custodian for the Fund to be held
under terms similar to those of this Agreement. The Custodian shall not be
required to make any such delivery or payment until full payment shall have been
made to the Custodian of all of its fees, compensation, costs and expenses. The
Custodian shall have a security interest in and shall have a right of setoff
against property in the Fund's possession as security for the payment of such
fees, compensation, costs and expenses.
16. NOTICES. All notices and other communications, including
Written Instructions, shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notice shall be addressed (a) if to the
Custodian, at the Custodian's address, 1900 East Ninth Street, Cleveland, Ohio
44114, marked for the attention of the Custodian Services Department (or its
successor); (b) if to the Fund, at the address of the Fund; or (c) if to neither
of the foregoing, at such other address as shall have been notified to the
sender of any such Notice or other communication. If notice is sent by
confirming telegram, cable, telex or facsimile sending device, it shall be
deemed to have been given immediately. If notice is sent by first-class mail, it
shall be deemed to have been given five days after it has been mailed. If notice
is sent by messenger, it shall be deemed to have been given on the day it is
delivered.
17. AMENDMENTS. This Agreement, or any term hereof, may be changed
or waived only by a written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
18. DELEGATION. The Custodian may assign its rights and delegate
its duties hereunder to any wholly-owned direct or indirect subsidiary of
National City Bank, or National City Corporation, provided that (i) the
Custodian gives the Fund thirty (30) days prior written notice; (ii) the
delegate agrees with the Custodian to comply with all relevant provisions of the
1940 Act; and (iii) the Custodian and such delegate promptly provide such
information as the
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<PAGE>
Fund may request, and respond to such questions as the Fund may ask, relative to
the delegation, including (without limitation) the capabilities of the delegate.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. FURTHER ACTIONS. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.
21. MISCELLANEOUS. The Custodian acknowledges that the Fund is a
Massachusetts business trust, and that it is required by the Declaration to
limit its liability in all agreements to the assets of the Fund. Consequently,
the Custodian agrees that any claims by it against the Fund may be satisfied
only from the assets of the Fund, and no shareholders, trustees or officers of
the Fund may be held personally liable or responsible for any obligations
arising out of this Agreement. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one more separate documents their agreement, if any, with respect
to delegated and/or Oral Instructions.
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
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<PAGE>
This Agreement shall be deemed to be a contract made in Ohio and governed
by Ohio law. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding and shall inure
to the benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below on the day and year first above
written.
NATIONAL CITY BANK
By: /s/Stephen D. McCreary
----------------------
Title: Senior Vice President
NCC FUNDS
By:/s/Richard B. Tullis
--------------------
Title: President
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<PAGE>
PORTFOLIOS
This EXHIBIT A, dated November 7, 1994, is that certain Exhibit A to a
Custodian Services Agreement dated as of November 7, 1994 between the
undersigned parties. This Exhibit A supersedes all previously dated Exhibits A.
Money Market Portfolio
Government Portfolio
Treasury Portfolio
Tax Exempt Portfolio
Equity Portfolio
Fixed Income Portfolio
Ohio Tax Exempt Portfolio
National Tax Exempt Portfolio
Equity Income Portfolio
Mid Cap Regional Equity Portfolio
Enhanced Income Fund
Total Return Advantage Fund
NATIONAL CITY BANK
By:/s/Stephen D. McCreary
----------------------
Title: Senior Vice President
NCC FUNDS
By:/s/Richard B. Tullis
--------------------
Title: President
-21-
<PAGE>
AUTHORIZED PERSONS
APPENDIX
This Appendix, dated November 7, 1994, is that certain Appendix
to a Custodian Services Agreement dated as of November 7, 1994 between NCC
Funds and National City Bank.
NAMES SIGNATURES
Robert D. Becker /s/ R.D. Becker
- ---------------- ---------------
Sharon J. Farmer /s/Sharon J. Farmer
- ---------------- -------------------
Ida Janik /s/Ida Janik
- --------- ------------
Stephen D. McCreary /s/Stephen McCreary
- ------------------- -------------------
Josephine Ramos /s/Josephine Ramos
- --------------- ------------------
J. Arlene Watson /s/ J.A. Watson
- ---------------- ----------------
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<PAGE>
[Letterhead of National City Bank]
NCC Funds
440 Lincoln Street
Worcester, Massachusetts 01653-0017
Re: Custodian Services Fees
-----------------------
Ladies and Gentlemen:
This letter constitutes our agreement with respect to compensation
to be paid to National City Bank (the "Custodian") under the terms of a
Custodian Services Agreement dated _________, 1994 (the "Agreement") between NCC
Funds ("you" or the "Fund") and the Custodian. Pursuant to Paragraph 11 of the
Agreement, and in consideration of the services to be provided to you, you will
pay the Custodian the following:
1. With respect to each of the Fund's investment portfolios
listed on Exhibit A to the Agreement (the "Portfolios"), an annual custody fee
of .020% of each Portfolio's first $100 million of average daily net assets,
.010% of each Portfolio's next $650 million of average daily net assets and
.008% of the average daily net assets of each Portfolio which exceed $750
million, exclusive of out-of-pocket expenses and transaction charges. Custody
fees shall be calculated daily and paid monthly.
2. The transaction charges are a bundled fee. This bundled fee
will not exceed .25% of the amount of total NCC Funds monthly asset based fee.
3. The Custodian's out-of-pocket expenses including, but not
limited to, postage, telephone, telex, interest claim fee ($50.00 per claim),
transfer and registration fees, federal express charges, Federal Reserve and
wire fees.
4. The Custodian's out-of-pocket costs in providing foreign
custody services and/or precious metal custody services.
The fee for the period from the date hereof until the end of such
year shall be pro-rated according to the proportion which such period bears to
the full annual period.
<PAGE>
NCC Funds
- ------------------
Page 2
If the foregoing accurately sets forth our agreement and you intend
to be legally bound thereby, please execute a copy of this letter and return it
to us.
Very truly yours,
NATIONAL CITY BANK
By:
---------------------
Accepted:
NCC FUNDS
By:
------------------
<PAGE>
MITSUBISHI GLOBAL CUSTODY
CUSTODIAN AGREEMENT
(FOREIGN AND DOMESTIC SECURITIES)
This Custodian Agreement is made by and between NATIONAL CITY BANK
("Principal") and THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION ("Custodian").
WHEREAS, Principal acts as a custodian of the property of certain customers
including without limitation certain investment companies registered under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the agreement between Principal and each customer (the "Custodian
Agreements") provide that Principal may from time to time employ as its agent
one or more sub-custodians, all in compliance with Section 17(f) of the 1940 Act
and Rule 17f-5 thereunder; and
WHEREAS, Principal is acting on behalf of each customer who wishes to
employ Custodian as a sub-custodian for the customers and appoint Custodian as
the agent of Principal and its Customers, and Custodian is willing to serve as
such sub-custodian on the terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual promises herein made,
Principal and Custodian agree as follows:
1. DEFINITIONS. Certain terms used in this Agreement are defined as
follows:
(a) "Account" means, collectively, each custodianship account
maintained by Custodian pursuant to Paragraph 3 of this Agreement.
(b) "Customer" means those Customers whose names are set forth on
Schedule A hereto. Principal may delete Customers from Schedule A upon notice to
the Custodian. Principal may add Customers to Schedule A with the Custodian's
consent.
(c) "Eligible Foreign Securities Depository" ("Depository"), shall
mean a securities depository or clearing agency incorporated or organized under
the laws of a country other than the United States which operates (i) the
central system for handling securities or equivalent book-entries in that
country, or (ii) a transnational system for the central handling of securities
or equivalent book-entries.
(d) "Investment Manager" means an investment advisor or manager
identified by Principal in a written notice to Custodian as having the authority
to direct Custodian regarding the management, acquisition, or disposition of
Securities.
<PAGE>
(e) "Securities" means domestic or foreign securities or both within
the meaning of Section 2(a)36 of the 1940 Act and regulations issued by the U.S.
Securities and Exchange Commission ("SEC") under Section 17(f) of the 1940 Act,
17 C.F.R. 270.17f-5(c)(1), as amended, which are held by Custodian in the
Account, and shall include cash of any currency or other property and all income
and proceeds of sale of such securities or other property.
(f) "Eligible Foreign Custodian" ("Sub-Custodian"), shall mean (i) a
banking institution or trust company incorporated or organized under the laws of
a country other than the United States that is regulated as such by that
country's government or an agency thereof and that has shareholders' equity in
excess of $200 million in U.S. currency (or a foreign currency equivalent
thereof), (ii) a majority owned direct or indirect subsidiary of a qualified
U.S. bank or bank holding company that is incorporated or organized under the
laws of a country other than the United States and that has shareholders' equity
in excess of $100 million in U.S. currency (or a foreign currency equivalent
thereof), (iii) a banking institution or trust company incorporated or organized
under the laws of a country other than the United States or a majority owned
direct or indirect subsidiary of a qualified U.S. bank as defined in Rule 17f-5
or bank holding company that is incorporated or organized under the laws of a
country other than the United States which has such other qualifications as
shall be specified in Instructions and approved by the Bank; or (iv) any other
entity that shall have been so qualified by exemptive order, rule or other
appropriate action of the SEC. Custodian shall evaluate and determine at least
annually the continued eligibility of each Sub-Custodian as described in
Paragraph 5(d) of this Agreement.
2. REPRESENTATIONS.
(a) Principal represents that with respect to any Account established
by Principal to hold Securities, Principal is authorized to enter into this
Agreement and to retain Custodian on the terms and conditions and for the
purposes described herein.
(b) Custodian represents that (i) it is organized under the laws of
the United States and has its principal place of business in the United States,
(ii) it is a bank within the meaning of Section 202(a)(2) of the Investment
Advisers Act of 1940 and Section 2(a)(5) of the Investment Company Act of 1940,
as amended, and (iii) it has equity capital in excess of $1 million.
3. ESTABLISHMENT OF ACCOUNTS. Principal hereby establishes with
Custodian, and may in the future establish, one or more separate Accounts for
the benefit of Principal, acting as custodian for each Customer. The Account
shall consist of Securities delivered to and receipted for by Custodian or by
any Sub-Custodian. Custodian, in its sole discretion, may reasonably refuse to
accept any property now or hereafter delivered to it for inclusion in the
Account. Principal shall be notified promptly of such refusal.
4. CUSTODY. Subject to the terms of this Agreement, Custodian shall be
responsible for the safekeeping and custody of the Securities. Custodian may (i)
retain possession of all or any portion of the Securities in a foreign branch or
other office of Custodian, or (ii) retain, in accordance with Paragraph 5 of
this Agreement, one or more Sub-Custodians to hold all or any
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<PAGE>
portion of the Securities. Custodian and any Sub-Custodian may, in accordance
with Paragraph 5 of this Agreement, deposit definitive or book-entry Securities
with one or more Depositories.
(a) If Custodian retains possession of Securities, Custodian shall
ensure the Securities are at all times properly identified as being held for the
appropriate Account. Custodian shall segregate physically the Securities from
any Property owned by Custodian. Custodian shall not be required to segregate
physically the Securities from other securities or property held by Custodian
for third parties as Custodian, but Custodian shall maintain adequate records
showing the true ownership of the Securities.
(b) If Custodian deposits Securities with a Sub-Custodian, Custodian
shall maintain adequate records showing the identity and location of the
Sub-Custodian, the Securities held by the Sub-Custodian, and each Account to
which such Securities belong.
(c) If Custodian or any Sub-Custodian deposits Securities with a
Depository, Custodian shall maintain, or shall cause the Sub-Custodian to
maintain, adequate records showing the identity and location of the Depository,
the Securities held by the Depository, and each Account to which such Securities
belong.
(d) If Principal directs Custodian to deliver certificates or other
physical evidence of ownership of Securities to any broker or other party, other
than a Sub-Custodian or Depository employed by Custodian for purposes of
maintaining the Account, Custodian's sole responsibility shall be to exercise
care and diligence in effecting the delivery as instructed by Principal. Upon
completion of the delivery, Custodian shall be discharged completely of any
further liability or responsibility with respect to the safekeeping and custody
of Securities so delivered.
(e) Custodian shall ensure that (i) the Securities will not be
subject to any right, charge, security interest, lien, or claim of any kind in
favor of Custodian or any Sub-Custodian or Depository except for the Securities'
safe custody or administration, and (ii) the beneficial ownership of the
Securities will be freely transferable without the payment of money or value
other than for safe custody or administration.
(f) Principal, each Customer and their authorized representatives
shall have reasonable access to inspect books and records maintained by
Custodian or any Sub-Custodian or Depository holding Securities hereunder to
verify the accuracy of such books and records. Custodian shall notify Principal
promptly of any applicable law or regulation in any country where Securities are
held that would restrict such access or inspection.
5. SUB-CUSTODIANS AND DEPOSITORIES. With Principal's approval, as
provided in paragraph 5C of the agreement, Custodian may from time to time
retain one or more Sub-Custodians and Depositories to hold Securities hereunder.
(a) Custodian shall exercise reasonable care in the selection of
Sub-Custodians and Depositories. In making its selection, Custodian shall
consider (i) the Sub-Custodian's or Depository's financial strength, general
reputation and standing in the country in
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<PAGE>
which it is located, its ability to provide efficiently the custodial services
required, and the relative cost of such services, (ii) whether the Sub-Custodian
or Depository would provide a level of safeguards for safekeeping and custody of
Securities not materially different from those prevailing in the U.S., (iii)
whether the Sub-Custodian or Depository has branch offices in the U.S. in order
to facilitate jurisdiction over and enforcement of judgments against it, and
(iv) in the case of a Depository, the number of its participants and its
operating history.
(b) Custodian is authorized and directed to deposit Securities with
each Sub-Custodian or (directly or through a Sub-Custodian) with each Depository
listed in Schedule B. If Custodian wishes to deposit Securities with a
Sub-Custodian or Depository not listed in Schedule B, Custodian shall give
Principal written notice of its intention to do so. The notice shall identify
the proposed Sub-Custodian or Depository and shall include reasonable available
information relied on by Custodian in making the selection.
(c) Within 30 days of its receipt of a notice from Custodian pursuant
to Paragraph 5 (b) of this Agreement regarding Custodian's proposed selection of
one or more Sub-Custodians or Depositories, Principal shall give written notice
to Custodian of Principal's approval or disapproval of the proposed selection.
Such selection shall be deemed approved if Principal does not respond within 30
days of receipt of such notice.
(d) Custodian shall evaluate and determine at least annually the
continued eligibility of each Sub-Custodian and Depository approved by Principal
to act as such hereunder. In discharging this responsibility, Custodian shall
(i) monitor continuously the day to day services and reports provided by each
Sub-Custodian or Depository, (ii) at least annually, obtain and review the
annual financial report published by such Sub-Custodian or Depository and any
reports on such Sub-Custodian or Depository prepared by a reputable independent
analyst, (iii) at least triennially, physically inspect the operations of such
Sub-Custodian or Depository and (iv) Custodian shall provide Principal with a
report of its annual review of each Sub-Custodian and Depository.
(e) If Custodian determines that any Sub-Custodian or Depository no
longer satisfies the applicable requirements described in Paragraph l(b) (in the
case of a Depository) or Paragraph l(e) (in the case of a Sub-Custodian) of this
Agreement or is otherwise no longer capable or qualified to perform the
functions contemplated herein, Custodian shall promptly give written notice
thereof to Principal. The notice shall, in addition, either (i) indicate
Custodian's intention to transfer Securities held by the removed Sub-Custodian
or Depository to another Sub-Custodian or Depository previously approved by
Principal, or (ii) include a notice pursuant to Paragraph 5(b) of this Agreement
of Custodian's intention to deposit Securities with a new Sub-Custodian or
Depository.
6. REGISTRATION. Subject to any specific instructions from Principal,
Custodian shall hold or cause to be held all Securities in the name of
Custodian, or any Sub-Custodian or Depository approved by Principal pursuant to
Paragraph 5 of this Agreement, or in the name of a nominee of any of them, as
Custodian shall determine to be appropriate under the circumstances.
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<PAGE>
7. TRANSACTIONS. Principal or any Investment Manager from time to time
may instruct Custodian (which in turn shall be responsible for giving
appropriate instructions to any Sub-Custodian or Depository) regarding the
purchase or sale of Securities in accordance with this Paragraph 7:
(a) Custodian shall effect and account for each Securities and
currency sale on the date such transaction actually settles; provided, however,
that Principal may in its sole discretion direct Custodian, in such manner as
shall be acceptable to Custodian, to account for Securities and currency
purchases and sales on contractual settlement date, regardless of whether
settlement of such transactions actually occurs on contractual settlement date.
Principal may, from time to time, direct Custodian to change the accounting
method employed by Custodian in a written notice delivered to Custodian at least
thirty (30) days prior to the date a change in accounting method shall become
effective.
(b) Custodian shall effect purchases by charging the Account with the
amount necessary to make the purchase and effecting payment to the seller or
broker for the securities or other property purchased. Custodian shall have no
liability of any kind to any person, including Principal, except in the case of
negligent or intentional tortious acts, or willful misconduct, if the Custodian
effects payment on behalf of Principal, and the seller or broker fails to
deliver the securities or other property purchased. Custodian shall exercise
such ordinary care and diligence as would be employed by a reasonably prudent
custodian and due diligence in examining and verifying the certificates or other
indicia of ownership of the property purchased before accepting them.
(c) Custodian shall effect sales by delivering certificates or other
indicia of ownership of the Property, and, as instructed, shall receive cash for
such sales. Custodian shall have no liability of any kind to any person,
including Principal, if Custodian exercises due diligence and delivers such
certificates or indicia of ownership and the purchaser or broker fails to effect
payment. If a purchase or sale is effected through a Depository, Custodian shall
exercise such ordinary care and diligence as would be employed by a reasonably
prudent custodian and due diligence in verifying proper consummation of the
transaction by the Depository.
(d) Principal or, where applicable, the Investment Manager, is
responsible for ensuring Custodian receives timely instructions and/or funds to
enable Custodian to effect settlement of any purchase or sale of Securities or
Currency Transactions. If Custodian does not receive such timely instructions or
funds, Custodian shall have no liability of any kind to any person, including
Principal, for failing to effect settlement. However, Custodian shall use
reasonable efforts to effect settlement as soon as possible after receipt of
appropriate instructions. Principal shall be liable for interest compensation
and/or principal amounts to Custodian and/or its counterparty for failure to
deliver instructions or funds in a timely manner to effect settlements of third
party foreign exchange funds movement.
(e) At the direction of Principal or the Investment Manager, as the
case may be, Custodian shall convert currency in the Account to other currencies
through customary channels including, without limitation, Custodian or any of
its affiliates, as shall be necessary to
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<PAGE>
effect any transaction directed by Principal or the Investment Manager.
Principal or the Investment Manager, as the case may be, acknowledges that 1)
the foreign currency exchange department is a part of the Custodian or one of
its affiliates or subsidiaries, 2) the Account is not obligated to effect
foreign currency exchange with Custodian, 3) the Custodian will receive benefits
for such foreign currency transactions which are in addition to the compensation
which the Custodian receives for administering the Account, and 4) the Custodian
will make available the relevant data so that Principal or the Investment
Manager, as the case may be, can determine that the foreign currency exchange
transactions are as favorable to the Account as terms generally available in
arm's length transactions between unrelated parties.
(f) Custodian shall have no responsibility to manage or recommend
investments of the Account or to initiate any purchase , sale, or other
investment transaction in the absence of instructions from Principal or, were
applicable, an Investment Manager.
8. CAPITAL CHANGES; INCOME.
(a) Custodian may, without further instructions from Principal or any
Investment Manager, exchange temporary certificates and may surrender and
exchange Securities for other securities in connection with any reorganization,
recapitalization, or similar transaction in which the owner of the Securities is
not given an option. Custodian has no responsibility to effect any such exchange
unless it has received actual notice of the event permitting or requiring such
exchange at its office designated in Paragraph 14 of this Agreement or at the
office of its designated agents.
(b) Custodian, or its designated agents, are authorized, as
Principal's agent, to surrender against payment maturing obligations and
obligations called for redemption, and to collect and receive payments of
interest and principal, dividends, warrants, and other things of value in
connection with Securities. Except as otherwise provided in Paragraph 15(d) of
this Agreement, Custodian or its designated agents shall not be obligated to
enforce collection of any item by legal process or other means.
(c) Custodian or its designated agents are authorized to sign for
Principal all declarations, affidavits, certificates, or other documents that
may be required to collect or receive payments or distributions with respect to
Securities. Custodian or its designated agents are authorized to disclose,
without further consent of Principal, Principal's identity to issuers of
Securities, or the agents of such issuers, who may request such disclosure.
9. NOTICES RE ACCOUNT SECURITIES. Custodian shall notify Principal or,
where applicable, the Investment Manager, of any reorganization,
recapitalization, or similar transaction not covered by Paragraph 8, and any
subscription rights, proxies, and other shareholder information pertaining to
the Securities actual notice of which is received by Custodian at its office
designated in Paragraph 14 of this Agreement or at the offices of its designated
agents. Custodian's sole responsibility in this regard shall be to give such
notices to Principal or the Investment Manager, as the case may be, within a
reasonable time after Custodian receives them, and Custodian shall not otherwise
be responsible for the timeliness of such notices. Custodian
-6-
<PAGE>
has no responsibility to respond or otherwise act with respect to any such
notice unless and until Custodian has received appropriate instructions from
Principal or the Investment Manager.
10. TAXES. Custodian shall pay or cause to be paid from the Account all
taxes and levies in the nature of taxes imposed on the Account or the Securities
thereof by any country. However, Custodian shall use reasonable efforts to
obtain refunds of taxes withheld on Securities or the income thereof that are
available under applicable tax laws, treaties, and regulations.
11. CASH. The Principal may from time to time, direct Custodian to hold
Account cash in The HighMark Group of mutual funds or in any investment company
for which Custodian or its affiliates or subsidiaries, acts as investment
advisor, custodies the assets, or provides other services. Principal shall
designate the particular HighMark fund or such other above-mentioned fund that
Principal deems appropriate for the Account. Principal or an Investment Manager,
where applicable, acknowledges that Custodian will receive fees for such
services which will be in addition to those fees charged by Custodian as agent
for the Account.
12. REPORTS. Custodian shall give written reports to Principal showing (i)
each transaction involving Securities effected by or reported to Custodian, (ii)
the identity and location of Securities held by Custodian as of the date of the
report, (iii) any transfer of location of Securities not otherwise reported, and
(iv) such other information as shall be agreed upon by Principal and Custodian.
Unless otherwise agreed upon by Principal and Custodian, Custodian shall provide
the reports described in this Paragraph 12 on a monthly basis.
13. INSTRUCTIONS FROM PRINCIPAL.
(a) Principal shall certify or cause to be certified to Custodian in
writing the names and specimen signatures of all persons authorized to give
instructions, notices, or other communications on behalf of Principal or any
Investment Manager. Such certification shall remain effective until Custodian
receives notice to the contrary.
(b) Principal or authorized Investment Manager, as the case may be,
may give instruction, notice, or other communication called for by this
Agreement to Custodian in writing, or by telecopy, telex, telegram, or other
form of electronic communication acceptable to Custodian. Unless otherwise
expressly provided, all Instructions shall continue in full force and effect
until canceled or superseded. Principal or Investment Manager may give and
Custodian may accept oral instructions on an exception basis; provided, however,
that Principal or Investment Manager shall promptly confirm any oral
communications in writing or by telecopy or other means permitted hereunder.
Principal will hold Custodian harmless for the failure of Principal or
Investment Manager to send confirmation in writing, the failure of such
confirmation to conform to the telephone instructions received or the
Custodian's failure to produce such confirmation at any subsequent time. The
Custodian may electronically record any instruction given by telephone, and any
other telephone discussions with respect to the Custody Account.
(c) All such communications shall be deemed effective upon receipt by
Custodian at its address specified in Paragraph 14 of this Agreement, as amended
from time to
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<PAGE>
time. Custodian without liability may rely upon and act in accordance with any
instruction that Custodian in good faith believes has been given by Principal or
an Investment Manager.
(d) Custodian may at any time request instructions from Principal and
may await such instructions without incurring liability. Custodian has no
obligation to act in the absence of such requested instructions, but may,
however, without liability take such action as it deems appropriate to carry out
the purposes of this Agreement.
14. ADDRESSES. Until further notice from either party, all communications
called for under this Agreement shall be addressed as follows:
IF TO PRINCIPAL:
Name: National City Bank
------------------------------------------------------
Street Address: 4100 West 150th Street
--------------------------------------------
City, State, Zip: Cleveland, Ohio 44135-1389
------------------------------------------
Attn: Robert D. Becker
------------------------------------------------------
Telephone: (216) 476-4575
-------------------------------------------------
Telecopier: (216) 476-5894
------------------------------------------------
Telex (Answerback):
----------------------------------------
IF TO CUSTODIAN:
THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION
Mitsubishi Global Custody
Attn: Ms. Janet E. Potter, Vice President
475 Sansome Street, 15th Floor
San Francisco, California 94111
Telephone: (415) 291-7685
Telecopier: (415) 291-7697
Telex (Answerback): 215748/MBCTD UR
15. CUSTODIAN'S RESPONSIBILITIES AND LIABILITIES:
(a) Custodian's duties and responsibilities shall be limited to those
expressly set forth in this Agreement, or as otherwise agreed by Custodian in
writing. In carrying out its responsibilities, Custodian shall exercise no less
than the same degree of care and diligence it usually exercises with respect to
similar property of its own.
-8-
<PAGE>
(b) Custodian (i) shall not be required to maintain any special
insurance for the benefit of Principal, and (ii) shall not be liable or
responsible for any loss of or damage to Securities resulting from any causes
beyond Custodian's reasonable control including, without limitations, acts of
God, war, government action, civil commotion, fire, earthquake, or other
casualty or disaster. However, Custodian shall use reasonable efforts to replace
Securities lost or damaged due to such causes with securities of the same class
and issue with all rights and privileges pertaining thereto. The Custodian shall
be liable to, and indemnify and hold harmless, the Principal and each Customer
for any loss which shall occur as the result of its own failure or the failure
of a Sub-Custodian to exercise reasonable care with respect to the safekeeping
of assets to the same extent that the Custodian would be liable to the Principal
and each Customer if the Custodian were holding such securities and cash in its
own premises only to the extent of the direct damages of Principal and such
Customer, to be determined based on the market value of the property which is
subject to loss and without reference to any special conditions or
circumstances.
(c) The parties intend that Custodian shall not be considered a
fiduciary of the Account. Accordingly, Custodian shall have no power to make
decisions regarding any policy, interpretation, practice, or procedure with
respect to the Account, but shall perform the ministerial and administrative
functions described in this Agreement as provided herein and within the
framework of policies, interpretations, rules, practices, and procedures made by
Principal or an investment manager, where applicable, as the same shall be
reflected in instructions to Custodian from Principal or any Investment Manager.
(d) Custodian shall not be required to appear in or defend any legal
proceedings with respect to the Account or the Securities unless Custodian has
been indemnified to its satisfaction against loss and expense (including
reasonable attorneys' fees).
(e) Custodian may consult with counsel acceptable to it after written
notification to Principal concerning its duties and responsibilities under this
Agreement, and shall not be liable for any action taken or not taken in good
faith on the written advice of such counsel.
(f) Principal and each Customer's right to indemnity under Paragraph
15(b) of this Agreement shall survive the termination of this Agreement.
16. INDEMNITIES.
(a) Principal hereby agrees to indemnify Custodian against all
liability, claims, demands, damages, losses, and costs, including reasonable
attorneys' fees and expenses of legal proceedings, resulting from Custodian's
compliance with instructions from Principal or any Investment Manager and the
terms of this Agreement, except where Custodian has acted with negligence or
willful misconduct.
(b) Custodian's right to indemnity under Paragraph 16(a) of this
Agreement shall survive the termination of this Agreement.
-9-
<PAGE>
17. COMPENSATION; EXPENSES. Principal shall reimburse Custodian for all
reasonable out-of-pocket expenses and processing costs incurred by Custodian in
the administration of the Account including, without limitation, reasonable
counsel fees incurred by Custodian pursuant to Paragraph 15(e) of this
Agreement. Principal also shall pay Custodian reasonable compensation for its
services hereunder as specified in Appendix A. Custodian shall be entitled to
withdraw such expenses or compensation from the Account if Principal fails to
pay the same to Custodian within 45 days after Custodian has sent an appropriate
billing to Principal.
18. AMENDMENT: TERMINATION. This Agreement may be amended at any time by a
written instrument signed by the parties. Either party may terminate this
Agreement and the Account upon 90 days' written notice to the other unless the
parties agree on a different time period. Upon such termination, Custodian shall
deliver or cause to be delivered the Securities, less any amounts due and owing
to Custodian under this Agreement, to a successor custodian designated by
Principal or, if a successor custodian has not accepted an appointment by the
effective date of termination of the Account, to Principal. Upon completion of
such delivery Custodian shall be discharged of any further liability or
responsibility with respect to the Securities so delivered.
19. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors in interest. Without consent
of the parties, this agreement cannot be assigned to any third party.
20. GOVERNING LAW. The validity, construction, and administration of this
Agreement shall be governed by the applicable laws of the United States from
time to time in force and effect and, to the extent not preempted by such laws
of the United States, by the laws of the State of California from time to time
in force and effect.
-10-
<PAGE>
21. EFFECTIVE DATE. This Agreement shall be effective as of the date
appearing below, and shall supersede any prior or existing agreements between
the parties pertaining to the subject matter hereof.
Date:
--------------------------------------------------
By:
--------------------------------------------------
Authorized Signature
"Principal," for Principal and for its Customers
THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION
By:
---------------------------------------
Title:
---------------------------------------
By:
---------------------------------------
Title:
---------------------------------------
"Custodian"
-11-
<PAGE>
SCHEDULE A
LIST OF CLIENTS PURSUANT TO CONTRACT
- --------------------------------------------------------------------------------
NCC Funds, a Massachusetts business trust, registered under the Investment
Company Act of 1940, as an open-end investment management company
<PAGE>
SCHEDULE B
TO CUSTODIAN AGREEMENT
BETWEEN NATIONAL CITY BANK AND
THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION
- --------------------------------------------------------------------------------
COUNTRY OR REGION APPROVED SUB-CUSTODIAN APPROVED DEPOSITORIES
Australia National Australia Bank, Ltd
Austria Creditanstalt Bankverein Wertpapiersanimelbank, a
division of Oesterreichische
Kontrollbank A.G.
Belgium Kredietbank N.V. and Caisse
Euroclear Clearance Interprofessionnelle
System Societe de Depots et de
Cooperative Virements de Titres, S.A.
Canada The Royal Bank of Canada The Canadian Depository for
Securities Limited
France Banque Indosuez Societe Interprofessionnelle
pour la Compensation des
Valeurs Mobilieres
Germany Dresdner Bank A.G. Deutscher Kassenverein, A.G.
Hong Kong The Hong Kong and The Central Clearing
Shanghai Banking and settlement System
Corporation Limited
Ireland Allied Irish Banks PLC
Japan The Mitsubishi Bank Japan Securities
Limited Depository Center
Luxembourg Centrale de Livraison de Centrale de Livraisonde
Valeurs Mobilieres, S.A. Valeurs Mobilieres, S.A.
("CEDEL") ("CEDEL")
Netherlands MeesPierson N.V. Nederlands Centraal
Instituut voor Giraal
Effectenverkehr B.V.
New Zealand National Australia Bank
Limited (New Zealand)
United Kingdom Midland Bank plc and
The First National Bank of
Chicago (London Branch)
<PAGE>
PURCHASE AGREEMENT
NCC Funds (the "Fund"), a Massachusetts business trust, and McDonald &
Company Securities, Inc., ("McDonald"), an Ohio corporation, hereby agree with
each other as follows:
1. The Fund hereby offers McDonald and McDonald hereby purchases
16,667 Class B shares of beneficial interest (no par value per share), 16,667
Class B shares of beneficial interest (no par value per share), 16,667 Class C
shares of beneficial interest (no par value per share), 16,667 Class E shares
of beneficial interest (no par value per share), 16,667 Class F shares of
beneficial interest (no par value per share) and 16,665 Class G shares of
beneficial interest (no par value per share) of the Fund (collectively known as
"Shares") at a price of $1.00 per Share. McDonald hereby acknowledges receipt
of one certificate representing 16,667 of the Fund's Class A shares of
beneficial interest, one certificate representing 16,667 shares of the Fund's
Class B shares of beneficial interest, one certificate representing 16,667 of
the Fund's Class C shares of beneficial interest, one certificate representing
16,667 shares of the Fund's Class E shares of beneficial interest, one
certificate representing 16,667 shares of the Fund's Class F shares of
beneficial interest and one certificate representing 16,665 shares of the
Fund's Class G shares of beneficial interest, and the Fund hereby acknowledges
receipt from McDonald of funds in the amount of $100,000 in full payment for
the Shares.
2. McDonald represents and warrants to the Fund that the Shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
3. McDonald agrees that if it or any direct or indirect
transferee of any of the Shares redeems any of the Shares prior to the fifth
anniversary of the date the Fund begins its investment activities, McDonald will
pay to the Fund an amount equal to the number resulting from multiplying the
Fund's total unamortized organizational expenses by a fraction, the numerator of
which is equal to the number of Shares redeemed by McDonald or such transferee
and the denominator of which is equal to the number of Shares outstanding as of
the date of such redemption, as long as the administrative position of the staff
of the Securities and Exchange Commission requires such reimbursement.
4. The names "NCC Funds" and Trustees of NCC Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of January 28, 1986 which is hereby referred to and a copy of
which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "NCC
Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders, or representatives of
the Trust personally, but bind only the Trust Property, and all persons dealing
with any class
<PAGE>
of shares of the Trust must look solely to the Trust Property belonging to
such class for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 28th day of January, 1986.
(SEAL) NCC FUNDS
ATTEST:
/s/ Lillian Villin By: /s/ Richard B. Tullis
- --------------------------- ----------------------------------
Richard B. Tullis, President
(SEAL)
ATTEST: McDONALD & COMPANY
SECURITIES, INC.
[Illegible] By:/s/ George S. Sherwin
- --------------------------- ----------------------------------
<PAGE>
PURCHASE AGREEMENT
AGREEMENT dated this 19th day of July, 1988, by and between NCC Funds
(the "Fund"), a Massachusetts business trust, and McDonald & Company Securities,
Inc. ("McDonald"), an Ohio Corporation.
WHEREAS, pursuant to a Purchase Agreement dated December 11, 1986,
McDonald agreed to purchase one (1) share of Class D shares of beneficial
interest (no par value per share) of the Fund at a price of $1.00 per share.
WHEREAS, in anticipation of the public offering of the Class D shares,
McDonald has agreed to purchase additional Class D shares as follows:
1. The Fund hereby offers McDonald and McDonald hereby purchases
16,766 Class D shares of beneficial interest (no par value per share) at a price
of $1.00 per share.
2. McDonald hereby acknowledges receipt of one certificate
representing 16,767 of the Fund's Class D shares of beneficial interest, and the
Fund hereby acknowledges receipt from McDonald of funds in the amount of $16,767
in full payment for the 16,766 shares purchased pursuant to this Agreement and
the (1) share purchase pursuant to the Purchase Agreement dated December 11,
1986 (collectively, the "Shares").
3. McDonald represents and warrants to the Fund that the Shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
4. McDonald agrees that if it or any direct or indirect
transferee of any of the Shares redeems any of the Shares prior to the fifth
anniversary of the date the Fund begins its investment activities, McDonald will
pay to the Fund an amount equal to the number resulting from multiplying the
Fund's total unamortized organizational expenses by a fraction, the numerator of
which is equal to the number of Shares rdeemed by McDonald or such transferee
and the denominator of which is equal to the number of Shares outstanding as of
the date of such redemption, as long as the administrative position of the staff
of the Securities and Exchange Commission requires such reimbursement.
5. The names "NCC Funds" and "Trustees of NCC Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of January 28, 1986 which is hereby referred to and a copy of
which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "NCC
Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the Trust Property, and all persons dealing with
any class of
<PAGE>
shares of the Trust must look solely to the Trust Property belonging to
such class for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 19th day of July, 1988.
NCC FUNDS
Attest:
/s/ Lillian Villin By: /s/ Richard B. Tullis
- ------------------------- -----------------------------------
Richard B. Tullis, President
McDONALD & COMPANY
SECURITIES, INC.
Attest:
[Illegible] By: /s/ George S. Sherwin
- ------------------------- -----------------------------------
<PAGE>
PURCHASE AGREEMENT
AGREEMENT dated this 17th day of October, 1989, by and between
NCC Funds (the "Fund"), a Massachusetts business trust, and McDonald & Company
Securities, Inc. ("McDonald"), an Ohio Corporation.
1. The Fund hereby offers McDonald and McDonald hereby purchases
10,000 Class J shares of beneficial interest (no par value per share) at a price
of $1.00 per Share (collectively known as "Shares").
2. McDonald hereby acknowledges receipt of one certificate
representing 10,000 of the Fund's Class J shares of beneficial interest, and the
Fund hereby acknowledges receipt from McDonald of funds in the amount of $10,000
for the Shares.
3. McDonald represents and warrants to the Fund that the Shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
4. McDonald agrees that if it or any direct or indirect
transferee of any of the Shares redeems any of the Shares prior to the fifth
anniversary of the date the Fund begins its investment activities, McDonald will
pay to the Fund an amount equal to the number resulting from multiplying the
Fund's total unamortized organizational expenses by a fraction, the numerator of
which is equal to the number of Shares redeemed by McDonald or such transferee
and the denominator of which is equal to the number of Shares outstanding as of
the date of such redemption, as long as the administrative position of the staff
of the Securities and Exchange Commission requires such reimbursement.
5. The names "NCC Funds" and "Trustees of NCC Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of January 28, 1986 which is hereby referred to and a copy of
which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "NCC
Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the Trust Property, and all persons dealing with
any class of shares of the Trust must look solely to the Trust Property
belonging to such class for the enforcement of any claims against the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 17th day of October, 1989.
NCC FUNDS
Attest:
By: /s/ Richard B. Tullis
- ---------------------------- ----------------------------------
Richard B. Tullis, President
McDONALD & COMPANY
SECURITIES, INC.
Attest:
By: [Illegible]
- ---------------------------- ----------------------------------
<PAGE>
PURCHASE AGREEMENT
AGREEMENT dated this 20th day of December, 1989, by and between NCC
Funds (the "Fund"), a Massachusetts business trust, and McDonald & Company
Securities, Inc. ("McDonald"), an Ohio Corporation.
1. The Fund hereby offers McDonald and McDonald hereby
purchases 1,000 Class H shares of beneficial interest (no par value per share)
at a price of $10 per Share, and 1,000 Class I shares of beneficial interest (no
par value per share) at a price of $10 per Share (collectively known as
"Shares").
2. McDonald hereby acknowledges receipt of one certificate
representing 1,000 of the Fund's Class H shares of beneficial interest, and one
certificate representing 1,000 of the Fund's Class I shares of beneficial
interest, and the Fund hereby acknowledges receipt from McDonald of funds in the
amount of $20,000 for the Shares.
3. McDonald represents and warrants to the Fund that the Shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
4. McDonald agrees that if it or any direct or indirect
transferee of any of the Shares redeems any of the Shares prior to the fifth
anniversary of the date the Fund begins its investment activities, McDonald will
pay to the Fund an amount equal to the number resulting from multiplying the
Fund's total unamortized organizational expenses by a fraction, the numerator of
which is equal to the number of Shares redeemed by McDonald or such transferee
and the denominator of which is equal to the number of Shares outstanding as of
the date of such redemption, as long as the administrative position of the staff
of the Securities and Exchange Commission requires such reimbursement.
5. The names "NCC Funds" and "Trustees of NCC Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of January 28, 1986 which is hereby referred to and a copy of
which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "NCC
Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the Trust Property, and all persons dealing with
any class of shares of the Trust must look solely to the Trust Property
belonging to such class for the enforcement of any claims against the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 20th day of December, 1989.
NCC FUNDS
Attest:
By: /s/ Richard B. Tullis
- ------------------------ -----------------------------------
Richard B. Tullis, President
McDONALD & COMPANY
SECURITIES, INC.
Attest:
By: [Illegible]
- ------------------------ -----------------------------------
<PAGE>
PURCHASE AGREEMENT
AGREEMENT dated this 5th day of January, 1990, by and between NCC
Funds (the "Fund"), a Massachusetts business trust, and McDonald & Company
Securities, Inc. ("McDonald"), an Ohio Corporation.
1. The Fund hereby offers McDonald and McDonald hereby purchases 1,000
Class K shares of beneficial interest (no par value per share) at a price of $10
per Share (collectively known as "Shares").
2. McDonald hereby acknowledges receipt of one certificate
representing 1,000 of the Fund's Class K shares of beneficial interest, and the
Fund hereby acknowledges receipt from McDonald of funds in the amount of $10,000
for the Shares.
3. McDonald represents and warrants to the Fund that the Shares are
being acquired for investment purposes and not with a view to the distribution
thereof.
4. McDonald agrees that if it or any direct or indirect transferee of
any of the Shares redeems any of the Shares prior to the fifth anniversary of
the date the Fund begins its investment activities, McDonald will pay to the
Fund an amount equal to the number resulting from multiplying the Fund's total
unamortized organizational expenses by a fraction, the numerator of which is
equal to the number of Shares redeemed by McDonald or such transferee and the
denominator of which is equal to the number of Shares outstanding as of the date
of such redemption, as long as the administrative position of the staff of the
Securities and Exchange Commission requires such reimbursement.
5. The names "NCC Funds" and "Trustees of NCC Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of January 28, 1986 which is hereby referred to and a copy of
which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "NCC
Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the Trust Property, and all persons dealing with
any class of shares of the Trust must look solely to the Trust Property
belonging to such class for the enforcement of any claims against the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 5th day of January, 1990.
NCC FUNDS
Attest:
By: /s/ Richard B. Tullis
- ---------------------------- ----------------------------------
Richard B. Tullis, President
McDONALD & COMPANY
SECURITIES, INC.
Attest:
By: [Illegible]
- ---------------------------- ----------------------------------
<PAGE>
PURCHASE AGREEMENT
AGREEMENT dated this 5th day of July, 1994, by and between NCC Funds
(the "Fund"), a Massachusetts business trust, and Allmerica Investments, Inc.
("Allmerica"), a Massachusetts corporation.
1. The Fund hereby offers Allmerica and Allmerica hereby purchases one
Class O share of beneficial interest (no par value per share) representing
interests in the Fund's Enhanced Income Fund at a price of $10 per share
(collectively known as "Shares").
2. Allmerica hereby acknowledges receipt of one Share. The Fund hereby
acknowledges receipt from Allmerica of funds in the amount of $10 for such
Share.
3. Allmerica represents and warrants to the Fund that the Shares are
being acquired for investment purposes and not with a view to the distribution
thereof.
4. The names "NCC Funds" and "Trustees of NCC Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of January 28, 1986 which is hereby referred to and a copy of
which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "NCC
Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the Trust Property, and all persons dealing with
any class of shares of the Trust must look solely to the Trust Property
belonging to such class for the enforcement of any claims against the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 5th day of July, 1994.
NCC FUNDS
Attest:
/s/ Christina Simmons By: /s/ Richard B. Tullis,
- ------------------------------ ---------------------------------
Richard B. Tullis, President
ALLMERICA INVESTMENTS, INC.
Attest:
/s/ Christina Simmons By: /s/ Richard M. Reilly
- ------------------------------ ---------------------------------
<PAGE>
PURCHASE AGREEMENT
AGREEMENT dated this 30th day of June, 1994, by and between NCC Funds
(the "Fund"), a Massachusetts business trust, and Allmerica Investments, Inc.
("Allmerica"), a Massachusetts corporation.
1. The Fund hereby offers Allmerica and Allmerica hereby purchases
one Class M share of beneficial interest (no par value per share) representing
interests in the Fund's Equity Income Portfolio at a price of $10 per share
(collectively known as "Shares").
2. Allmerica hereby acknowledges receipt of one Share. The Fund
hereby acknowledges receipt from Allmerica of funds in the amount of $10 for
such Share.
3. Allmerica represents and warrants to the Fund that the Shares are
being acquired for investment purposes and not with a view to the distribution
thereof.
4. The names "NCC Funds" and "Trustees of NCC Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of January 28, 1986 which is hereby referred to and a copy of
which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "NCC
Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the Trust property, and all persons dealing with
any class of shares of the Trust must look solely to the Trust Property
belonging to such class for the enforcement of any claims against the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 30th day of June, 1994.
NCC FUNDS
Attest:
/s/ Christina Simmons By: /s/ Richard B. Tullis
- ------------------------------- ------------------------------
Richard B. Tullis, President
ALLMERICA INVESTMENTS, INC.
Attest:
/s/ Christina Simmons By: /s/ Richard M. Reilly
- ------------------------------- ------------------------------
<PAGE>
PURCHASE AGREEMENT
AGREEMENT dated this 25th day of July, 1994, by and between NCC Funds
(the "Fund"), a Massachusetts business trust, and Allmerica Investments, Inc.
("Allmerica"), a Massachusetts corporation.
1. The Fund hereby offers Allmerica and Allmerica hereby purchases
one Class N share of beneficial interest (no par value per share) representing
interests in the Fund's Mid Cap Regional Equity Portfolio at a price of $10 per
share (collectively known as "Shares").
2. Allmerica hereby acknowledges receipt of one Share. The Fund
hereby acknowledges receipt from Allmerica of funds in the amount of $10 for
such Share.
3. Allmerica represents and warrants to the Fund that the Shares are
being acquired for investment purposes and not with a view to the distribution
thereof.
4. The names "NCC Funds" and "Trustees of NCC Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of January 28, 1986 which is hereby referred to and a copy of
which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "NCC
Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the Trust property, and all persons dealing with
any class of shares of the Trust must look solely to the Trust Property
belonging to such class for the enforcement of any claims against the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 25th day of July, 1994.
NCC FUNDS
Attest:
/s/ Christina Simmons By: /s/ Richard B. Tullis
- ---------------------------- ---------------------------------
Richard B. Tullis, President
ALLMERICA INVESTMENTS, INC.
Attest:
/s/ Christina Simmons By: /s/ Richard M. Reilly
- ---------------------------- ---------------------------------
<PAGE>
PURCHASE AGREEMENT
AGREEMENT dated this 5th day of July, 1994, by and between NCC Funds
(the "Fund"), a Massachusetts business trust, and Allmerica Investments, Inc.
("Allmerica"), a Massachusetts corporation.
1. The Fund hereby offers Allmerica and Allmerica hereby purchases one
Class P share of beneficial interest (no par value per share) representing
interests in the Fund's Total Return Advantage Fund at a price of $10 per share
(collectively known as "Shares").
2. Allmerica hereby acknowledges receipt of one Share. The Fund hereby
acknowledges receipt from Allmerica of funds in the amount of $10 for such
Share.
3. Allmerica represents and warrants to the Fund that the Shares are
being acquired for investment purposes and not with a view to the distribution
thereof.
4. The names "NCC Funds" and "Trustees of NCC Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of January 28, 1986 which is hereby referred to and a copy of
which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "NCC
Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the Trust property, and all persons dealing with
any class of shares of the Trust must look solely to the Trust Property
belonging to such class for the enforcement of any claims against the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 5th day of July, 1994.
NCC FUNDS
Attest:
/s/ Christina Simmons By: /s/ Richard B. Tullis,
- ------------------------------ ---------------------------------
Richard B. Tullis, President
ALLMERICA INVESTMENTS, INC.
Attest:
/s/ Christina Simmons By: /s/ Richard M. Reilly
- ------------------------------ ---------------------------------
<PAGE>
PURCHASE AGREEMENT
AGREEMENT dated this _______ day of _________, 1994, by and between
NCC Funds (the "Fund"), a Massachusetts business trust, and Allmerica
Investments, Inc. ("Allmerica"), a Massachusetts Corporation.
1. The Fund hereby offers Allmerica and Allmerica hereby purchases one
Class L share of beneficial interest (no par value per share) representing
interests in the Fund's National Tax Exempt Portfolio at a price of $10 per
share (collectively known as "Shares").
2. Allmerica hereby acknowledges receipt of ___________________
Shares. The Fund hereby acknowledges receipt from Allmerica of funds in the
amount of $____________ for such Shares.
3. Allmerica represents and warrants to the Fund that the Shares are
being acquired for investment purposes and not with a view to the distribution
thereof.
5. The names "NCC Funds" and "Trustees of NCC Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of January 28, 1986 which is hereby referred to and a copy of
which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "NCC
Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the Trust Property, and all persons dealing with
any class of shares of the Trust must look solely to the Trust Property
belonging to such class for the enforcement of any claims against the Trust.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ___day of ______________, 1994.
NCC FUNDS
Attest:
By:
- ----------------------------- -------------------------------------
Richard B. Tullis, President
ALLMERICA INVESTMENTS, INC.
Attest:
By:
- ----------------------------- -------------------------------------
<PAGE>
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 Statement of Additional
Information that is included in, and to the incorporation by reference of our
Opinion dated September 18, 1998 in Post-Effective Amendment No. 47 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
October 4, 1999
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectuses and "Auditors" in the Statement of Additional
Information and to the incorporation by reference in this Post-Effective
Amendment Number 48 to the Registration Statement (Form N-1A)
(No. 33-488/811-4416) of Armada Funds of our report dated July 9, 1999, included
in the 1999 Annual Report to shareholders.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
September 28, 1999
