<PAGE> 1
As filed with the Securities and Exchange Commission on June 27, 2000
Registration No. 33-488/811-4416
-------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 51 [X]
[X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 50 [X]
[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
The Registrant hereby incorporates herein by reference the Registrant's
Prospectus dated September 28, 1999 for its Class I Shares and its Prospectus
dated December 10, 1999 for its Class A, Class B and Class C Shares.
<PAGE> 2
ARMADA FUNDS
I SHARES (INSTITUTIONAL)
Prospectus dated September 28, 1999
(as revised on June 10, 2000 and June 16, 2000)
THIS SUPPLEMENT PROVIDES NEW AND ADDITIONAL INFORMATION BEYOND THAT CONTAINED IN
THE PROSPECTUS AND SHOULD BE RETAINED AND READ IN CONJUNCTION WITH SUCH
PROSPECTUS.
1. Effective June 9, 2000, the new name of the Armada Enhanced Income Fund is
the Armada Limited Maturity Bond Fund.
2. The Average Annual Total Returns chart for the Armada Small Cap Growth Fund
(page 5) is deleted and replaced with the following information:
<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) -6.43% 14.11%(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 Stock Index with less than average growth
orientation.
3. The Average Annual Total Returns chart for the Armada Small Cap Growth Fund
(page 7) is deleted and replaced with the following information:
<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) 1.23% 10.62%(2)
------------------------------------------------------------------------------
</TABLE>
(1) Since December 20, 1989.
(2) Since December 31, 1989.
(3) The Russell 2000 Growth Index is comprised of securities
in the Russell 2000 Stock Index with a greater than
average growth orientation.
1
<PAGE> 3
4. Effective June 9, 2000, the "Calendar Year Total Return" bar chart, Best
Quarter/Worst Quarter information, performance as of June 30, 1999 and
Average Annual Total Returns for the Armada Bond Fund (page 24) are deleted
and replaced with the following information:
CALENDAR YEAR TOTAL RETURNS
[GRAPH]
<TABLE>
<S> <C>
Year Total Returns - Class A Shares
1990 8.12%
1991 15.04%
1992 6.23%
1993 9.83%
1994 -3.50%
1995 18.05%
1996 3.41%
1997 9.28%
1998 7.50%
1999 -1.75%
</TABLE>
<TABLE>
<S> <C> <C>
Best quarter 6.16% (6/30/95)
--------------------------------------------------------------------------
Worst quarter -2.67% (3/31/94)
--------------------------------------------------------------------------
</TABLE>
This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the Lehman Brothers Aggregate Bond Index.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Armada Bond Fund -1.75% 7.10% 7.03% 7.25%(1)
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond
Index(2) -0.83% 7.73% 7.70% 8.06%(1)
--------------------------------------------------------------------------------
</TABLE>
(1) Since October 31, 1988.
(2) The Lehman Brothers 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.
5. The Average Annual Total Returns chart for the Armada National Tax Exempt
Fund (page 36) is deleted and replaced with the following information:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS
----------------------------------------------------------------------------
<S> <C> <C> <C>
Armada National Tax Exempt Fund 5.95% 3.98% 6.39%
----------------------------------------------------------------------------
Lehman 10 Year Municipal Bond Index(1) 6.76% 6.35% 8.32%
----------------------------------------------------------------------------
</TABLE>
(1) 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.
2
<PAGE> 4
6. Effective June 10, 2000, the sentence under "Performance Information" for the
Armada Mid Cap Growth Fund (page 51) is deleted and replaced with the
following 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 bar chart shows changes in the performance of the Fund's Class I Shares from
year to year.
CALENDAR YEAR TOTAL RETURNS
[GRAPH]
<TABLE>
<S> <C>
Year Total Returns
1990 -3.30%
1991 27.60%
1992 15.22%
1993 12.97%
1994 -5.30%
1995 29.86%
1996 18.32%
1997 11.70%
1998 11.31%
1999 45.85%
</TABLE>
<TABLE>
<S> <C> <C>
Best quarter 35.09% (12/31/99)
--------------------------------------------------------------------------
Worst quarter -19.22% (9/30/98)
--------------------------------------------------------------------------
</TABLE>
This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the Russell Midcap Growth Index.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
CLASS I SHARES 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Armada Mid Cap Growth Fund 45.85% 22.75% 15.53% 16.94%(1)
----------------------------------------------------------------------------------
Russell Midcap Growth Index(2) 51.30% 28.02% 18.95% 19.84%(1)
----------------------------------------------------------------------------------
</TABLE>
(1) Since October 31, 1988.
(2) The Russell Midcap Growth Index is a market value-weighted
index that tracks the continuous price-only performance of
the securities of the smallest 800 companies in the
Russell 1000.
3
<PAGE> 5
7. Effective June 10, 2000, the sentence under "Performance Information" for the
Armada Large Cap Ultra Fund (page 53) is deleted and replaced with the
following 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 bar chart shows changes in the performance of the Fund's Class I Shares from
year to year.
CALENDAR YEAR TOTAL RETURNS
[GRAPH]
<TABLE>
<S> <C>
Year Total Returns
1996 23.23%
1997 29.08%
1998 42.62%
1999 29.04%
</TABLE>
<TABLE>
<S> <C> <C>
Best quarter 25.53% (12/31/98)
--------------------------------------------------------------------------
Worst quarter -9.12% (9/30/98)
--------------------------------------------------------------------------
</TABLE>
This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the S&P Barra Growth Index.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
CLASS I SHARES 1 YEAR SINCE INCEPTION
------------------------------------------------------------------------------
<S> <C> <C>
Armada Large Cap Ultra Fund 29.04% 30.80%(1)
------------------------------------------------------------------------------
S&P Barra Growth Index(2) 28.26% 32.43%(1)
------------------------------------------------------------------------------
</TABLE>
(1) Since December 28, 1995.
(2) The S&P/Barra Growth Index is constructed by dividing the
stocks in the S&P 500 Composite Index by a single
attribute: price-to-book ratio. The S&P/Barra Growth Index
has firms with higher price-to-book ratios. Like the S&P
500 Composite Index, the S&P/Barra Growth Index is market
capitalization-weighted, meaning that each stock is
weighted in the appropriate index in proportion to its
market value.
4
<PAGE> 6
8. Effective June 10, 2000, the sentence under "Performance Information" for the
Armada U.S. Government Income Fund (page 55) is deleted and replaced with the
following 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 bar chart shows changes in the performance of the Fund's Class I Shares from
year to year.
CALENDAR YEAR TOTAL RETURNS
[GRAPH]
<TABLE>
<S> <C>
Year Total Returns
1993 7.48%
1994 -0.55%
1995 13.78%
1996 4.70%
1997 8.10%
1998 7.08%
1999 1.23%
</TABLE>
<TABLE>
<S> <C> <C>
Best quarter 3.94% (6/30/95)
--------------------------------------------------------------------------
Worst quarter -1.06% (3/31/94)
--------------------------------------------------------------------------
</TABLE>
This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the Lehman Brothers Mortgage-Backed
Securities Index.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Armada U.S. Government Income Fund 1.23% 6.90% 5.83%(1)
--------------------------------------------------------------------------------
Lehman Brothers Mortgage-Backed Securities
Index(2) 1.85% 7.98% 6.50%(1)
--------------------------------------------------------------------------------
</TABLE>
(1) Since November 12, 1992.
(2) The Lehman Brothers Mortgage-Backed Securities Index
includes all fixed-rate securities backed by mortgage
pools of the Government National Mortgage Association
(GNMA), Federal Home Loan Mortgage Corporation (FHLMC),
and Federal National Mortgage Association (FNMA).
Graduated Payment Mortgages (GPMs) are included, but
Graduated Equity Mortgages (GEMs) are not.
5
<PAGE> 7
9. Effective June 10, 2000, the sentence under "Performance Information" for the
Armada Michigan Municipal Bond Fund (page 57) is deleted and replaced with
the following 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 bar chart shows changes in the performance of the Fund's Class I Shares from
year to year.
CALENDAR YEAR TOTAL RETURNS
[GRAPH]
<TABLE>
<S> <C>
Year Total Returns
1991 9.78%
1992 6.98%
1993 9.74%
1994 -2.86%
1995 13.63%
1996 3.03%
1997 7.18%
1998 5.00%
1999 -1.34%
</TABLE>
<TABLE>
<S> <C> <C>
Best quarter 5.25% (3/31/95)
--------------------------------------------------------------------------
Worst quarter -3.28% (3/31/94)
--------------------------------------------------------------------------
</TABLE>
This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the Lehman Brothers 7-year Municipal Bond
Index.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Armada Michigan Municipal Bond Fund -1.34% 5.39% 5.61%(1)
--------------------------------------------------------------------------------
Lehman Brothers 7 Year Municipal Bond
Index(3) -0.41% 6.36% 6.56%(2)
--------------------------------------------------------------------------------
</TABLE>
(1) Since July 2, 1990.
(2) Since June 30, 1990.
(3) The Lehman Brothers 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.
6
<PAGE> 8
10. Effective June 16, 2000, the sentence under "Performance Information" for
the Armada Treasury Plus Money Market Fund (page 59) is deleted and replaced
with the following 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 bar chart shows changes in the performance of the Fund's Class I Shares from
year to year.
CALENDAR YEAR TOTAL RETURNS
[GRAPH]
<TABLE>
<S> <C>
Year Total Returns
1994 3.71
1995 5.42
1996 4.89
1997 5.06
1998 4.96
1999 4.44
</TABLE>
<TABLE>
<S> <C> <C>
Best quarter 1.36% (6/30/95)
--------------------------------------------------------------------------
Worst quarter 0.65% (3/31/94)
--------------------------------------------------------------------------
</TABLE>
This table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
CLASS I SHARES 1 YEAR 5 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Armada Treasury Plus Money Market Fund 4.44% 4.96% 4.72%(1)
--------------------------------------------------------------------------------
</TABLE>
(1) Since December 1, 1993.
11. The "Annual Fund Operating Expenses" chart for the Armada Treasury Plus
Money Market Fund (page 59) is deleted and replaced with the following:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
CLASS I
---------------------------------------------------------------------
<S> <C>
Investment Advisory Fees 0.30%
---------------------------------------------------------------------
Distribution and Service (12b-1) Fees 0.10%
---------------------------------------------------------------------
Other Expenses(1) 0.16%
---------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.56%
---------------------------------------------------------------------
</TABLE>
(1) "Other Expenses" are based on estimated amounts for the
current fiscal year.
7
<PAGE> 9
12. On June 9, 2000, the Parkstone Bond Fund was reorganized into the Armada
Bond Fund. In connection with this reorganization, the Armada Bond Fund
adopted the financial highlights, financial statements and performance
history of the Parkstone Bond Fund. The Financial Highlights tables set
forth below replace the information on page 80 and present unaudited
financial information for the six-month period ended November 30, 1999, and
audited financial information for the past five fiscal years or periods. The
information for the semi-annual period ended November 30, 1999 is unaudited,
and such information, along with the Parkstone Bond Fund's financial
statements is included in the Parkstone Bond Fund's Semi-Annual Report and
incorporated by reference into the SAI. The information for the past five
fiscal years or periods has been audited by PricewaterhouseCoopers LLP,
independent auditors, whose report, along with the Parkstone Bond Fund's
financial information, is included in the Parkstone Bond Fund's Annual
Report and incorporated by reference into the SAI. The Trust's SAI and the
Parkstone Bond Fund's Annual and Semi-Annual Reports are available free of
charge by calling 1-800-622-FUND (3863).
BOND FUND -- CLASS I
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1999 MAY 31, 1999
----------------- ------------
<S> <C> <C>
Net Asset Value, Beginning of Period........................ $ 9.93 $ 10.25
-------- --------
INVESTMENT ACTIVITIES
Net investment income (loss).............................. 0.29 0.57
Net realized and unrealized gains (losses) from
investments............................................ (0.24) (0.30)
-------- --------
Total from Investment Activities..................... 0.05 0.27
-------- --------
DISTRIBUTIONS
Net investment income..................................... (0.29) (0.57)
Net realized gains........................................ -- (0.02)
-------- --------
Total Distributions.................................. (0.29) (0.59)
-------- --------
Net Asset Value, End of Period.............................. $ 9.69 $ 9.93
======== ========
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION CHARGES)........ 0.47%(b) 2.70%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)......................... $336,473 $366,230
Ratio of expenses to average net assets................... 0.94%(c) 0.94%
Ratio of net investment income (loss) to average net
assets................................................. 5.92%(c) 5.53%
Ratio of expenses to average net assets*.................. 0.99%(c) 1.03%
Portfolio turnover (a).................................... 53.86% 268.66%
</TABLE>
---------------
The performance set forth in this table is the financial data of the Parkstone
Bond Fund, series of a predecessor company, the Parkstone Group of Funds. Armada
Bond Fund acquired the assets and assumed the liabilities of Parkstone Bond Fund
on June 9, 2000. The net asset value at the beginning of each period and the
changes in net asset values, including the net asset values at the end of each
period listed have been restated to reflect the conversion ratio of .9799154 on
the date of reorganization.
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(b) Not annualized.
(c) Annualized.
8
<PAGE> 10
BOND FUND -- CLASS I (CONTINUED)
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
MAY 31, 1998 JUNE 30, 1997
------------- -------------
<S> <C> <C>
Net Asset Value, Beginning of Period........................ $ 9.93 $ 9.76
-------- --------
INVESTMENT ACTIVITIES
Net investment income (loss).............................. 0.57 0.60
Net realized and unrealized gains (losses) from
investments............................................ 0.32 0.17
-------- --------
Total from Investment Activities..................... 0.89 0.77
-------- --------
DISTRIBUTIONS
Net investment income..................................... (0.57) (0.60)
-------- --------
Total Distributions.................................. (0.57) (0.60)
-------- --------
Net Asset Value, End of Period.............................. $ 10.25 $ 9.93
======== ========
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION CHARGES)........ 9.15%(a) 8.20%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)......................... $481,998 $492,102
Ratio of expenses to average net assets................... 0.94%(b) 0.94%
Ratio of net investment income (loss) to average net
assets................................................. 6.06%(b) 6.13%
Ratio of expenses to average net assets*.................. 1.04%(b) 1.03%
Portfolio turnover (c).................................... 545.68% 827.00%
</TABLE>
---------------
The performance set forth in this table is the financial data of the Parkstone
Bond Fund, series of a predecessor company, the Parkstone Group of Funds. Armada
Bond Fund acquired the assets and assumed the liabilities of Parkstone Bond Fund
on June 9, 2000. The net asset value at the beginning of each period and the
changes in net asset values, including the net asset values at the end of each
period listed have been restated to reflect the conversion ratio of .9799154 on
the date of reorganization.
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
9
<PAGE> 11
BOND FUND -- CLASS I (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
------------- ------------- -------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $ 9.92 $ 9.48 $ 10.75
-------- -------- --------
INVESTMENT ACTIVITIES
Net investment income (loss)......................... 0.60 0.62 0.61
Net realized and unrealized gains (losses) from
investments....................................... (0.16) 0.44 (0.74)
-------- -------- --------
Total from Investment Activities................ 0.44 1.06 (0.13)
-------- -------- --------
DISTRIBUTIONS
Net investment income................................ (0.60) (0.62) (0.59)
In excess of net realized gains...................... -- -- (0.55)
-------- -------- --------
Total Distributions............................. (0.60) (0.62) (1.14)
-------- -------- --------
Net Asset Value, End of Period....................... $ 9.76 $ 9.92 $ 9.48
======== ======== ========
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION CHARGES)... 4.49% 11.78% (1.52)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).................... $549,336 $509,189 $469,903
Ratio of expenses to average net assets.............. 0.94% 1.02% 0.88%
Ratio of net investment income (loss) to average net
assets............................................ 5.96% 6.54% 5.97%
Ratio of expenses to average net assets*............. 1.03% 1.14% 1.02%
Portfolio turnover (a)............................... 1189.27% 1010.64% 893.27%
</TABLE>
---------------
The performance set forth in this table is the financial data of the Parkstone
Bond Fund, series of a predecessor company, the Parkstone Group of Funds. Armada
Bond Fund acquired the assets and assumed the liabilities of Parkstone Bond Fund
on June 9, 2000. The net asset value at the beginning of each period and the
changes in net asset values, including the net asset values at the end of each
period listed have been restated to reflect the conversion ratio of .9799154 on
the date of reorganization.
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
10
<PAGE> 12
13. The Mid Cap Growth, Large Cap Ultra, U.S. Government Income, Michigan
Municipal Bond and Treasury Plus Money Market Funds each began operations as
a separate portfolio (each, a "Predecessor Fund") of The Parkstone Group of
Funds. On June 10, 2000, the Mid Cap Growth, Large Cap Ultra, U.S.
Government Income and Michigan Municipal Bond Funds were each reorganized as
new portfolios of the Trust. Similarly, on June 16, 2000, the Treasury Plus
Money Market Fund was reorganized as a new portfolio of the Trust. The
Financial Highlights tables set forth below present unaudited financial
information for the six-month period ended November 30, 1999, and audited
financial information for the past five fiscal years (or the period since a
Predecessor Fund commenced operations). The information for the semi-annual
period ended November 30, 1999 is unaudited, and such information, along
with the Predecessor Funds' financial statements, is included in the
Predecessor Funds' Semi-Annual Report and incorporated by reference into the
SAI. The information for the past five fiscal years or periods has been
audited by PricewaterhouseCoopers LLP, independent auditors, whose report,
along with the Predecessor Funds' financial information, is included in the
Predecessor Funds' Annual Report and incorporated by reference into the SAI.
The Trust's SAI, and the Predecessor Funds' Annual and Semi-Annual Reports,
are available free of charge by calling 1-800-622-FUND (3863).
TREASURY PLUS MONEY MARKET FUND -- CLASS I
<TABLE>
<CAPTION>
SIX MONTHS ELEVEN MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
NOVEMBER 30, 1999 MAY 31, 1999 MAY 31, 1998 JUNE 30, 1997
----------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- --------
INVESTMENT ACTIVITIES
Net investment income............ 0.022 0.045 0.046 0.048
DISTRIBUTIONS
Net investment income............ (0.022) (0.045) (0.046) (0.048)
-------- -------- -------- --------
Net Asset Value, End of Period... $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ========
TOTAL RETURN....................... 2.24%(a) 4.61% 4.70%(a) 4.93%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000)......................... $235,662 $269,534 $321,584 $324,377
Ratio of expenses to average net
assets........................ 0.60%(b) 0.58% 0.57%(b) 0.57%
Ratio of net investment income to
average net assets............ 4.42%(b) 4.52% 5.00%(b) 4.83%
Ratio of expenses to average net
assets*....................... 0.67%(b) 0.68% 0.67%(b) 0.67%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
TREASURY PLUS MONEY MARKET FUND -- CLASS I
<TABLE>
<CAPTION>
DECEMBER 1, 1993
YEAR ENDED YEAR ENDED TO
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 (a)
------------- ------------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 1.000 $ 1.000 $ 1.000
-------- -------- -------
INVESTMENT ACTIVITIES............................. 0.050 0.048 0.017
DISTRIBUTIONS..................................... (0.050) (0.048) (0.017)
-------- -------- -------
Net Asset Value, End of Period............. $ 1.000 $ 1.000 $ 1.000
======== ======== =======
TOTAL RETURN...................................... 5.14% 4.91% 1.72%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)............... $223,416 $192,232 $76,035
Ratio of expenses to average.................... 0.60% 0.64% 0.54%(c)
Ratio of net investment income to average net
assets....................................... 4.98% 4.95% 3.15%(c)
Ratio of expenses to average net assets*........ 0.70% 0.78% 0.74%(c)
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
11
<PAGE> 13
MID CAP GROWTH FUND -- CLASS I
<TABLE>
<CAPTION>
SIX ELEVEN
MONTHS MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
NOVEMBER 30, 1999 MAY 31, 1999 MAY 31, 1998 JUNE 30, 1997
----------------- ------------ ------------------- -------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $ 14.27 $ 15.12 $ 15.82 $ 20.83
-------- -------- -------- --------
INVESTMENT ACTIVITIES
Net investment income (loss)...... (0.07) (0.14) (0.11) (0.13)
Net realized and unrealized gains
(losses) from investments...... 2.84 1.13 2.52 1.25
-------- -------- -------- --------
Total from Investment
Activities................... 2.77 0.99 2.41 1.12
-------- -------- -------- --------
DISTRIBUTIONS
Net realized gains................ -- (1.84) (3.11) (6.13)
-------- -------- -------- --------
Total distributions....... -- (1.84) (3.11) (6.13)
-------- -------- -------- --------
Net asset value, end of period...... $ 17.04 $ 14.27 $ 15.12 $ 15.82
======== ======== ======== ========
TOTAL RETURN (EXCLUDES SALES AND
REDEMPTION CHARGES)............... 19.41%(a) 8.20% 16.98%(a) 5.58%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000).......................... $329,229 $319,733 $518,080 $544,082
Ratio of expenses to average net
assets......................... 1.35%(b) 1.32% 1.30%(b) 1.31%
Ratio of net investment income
(loss) to average net assets... (0.86)%(b) (0.75)% (0.77)%(b) (0.80)%
Portfolio turnover (c)............ 52.62% 100.19% 38.41% 38.47%
</TABLE>
---------------
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
12
<PAGE> 14
MID CAP GROWTH FUND -- CLASS I (CONTINUED)
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period....................... $ 16.62 $ 14.70 $ 15.10
-------- -------- --------
INVESTMENT ACTIVITIES
Net investment income (loss)............................. (0.16) (0.08) (0.11)
Net realized and unrealized gains (losses) from
investments........................................... 5.03 3.47 (0.25)
-------- -------- --------
Total from Investment Activities.................... 4.87 3.39 (0.36)
-------- -------- --------
DISTRIBUTIONS
Net realized gains....................................... (0.66) (0.49) (0.04)
In excess of net realized gains.......................... -- (0.98) --
-------- -------- --------
Total Distributions................................. (0.66) (1.47) (0.04)
-------- -------- --------
Net Asset Value, End of Period............................. $ 20.83 $ 16.62 $ 14.70
======== ======== ========
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION CHARGES)....... 29.83% 25.20% (2.44)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)........................ $650,495 $683,320 $533,260
Ratio of expenses to average net assets.................. 1.29% 1.29% 1.28%
Ratio of net investment income (loss) to average net
assets................................................ (0.68)% (0.64)% (0.65)%
Ratio of expenses to average net assets*................. -- 1.29% 1.28%
Ratio of net investment income (loss) to average net
assets*............................................... -- (0.65)% (0.65)%
Portfolio turnover (a)................................... 49.27% 46.39% 70.87%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
13
<PAGE> 15
LARGE CAP ULTRA FUND -- CLASS I
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1999 MAY 31, 1999
----------------- ------------
<S> <C> <C>
Net Asset Value, Beginning of Period........................ $ 19.81 $ 16.27
-------- --------
INVESTMENT ACTIVITIES
Net investment income (loss).............................. (0.04) (0.06)
Net realized and unrealized gains (losses) from
investments............................................ 3.47 3.90
-------- --------
Total from Investment Activities....................... 3.43 3.84
-------- --------
DISTRIBUTIONS
Net realized gains........................................ -- (0.30)
-------- --------
Total Distributions.................................... -- (0.30)
-------- --------
Net asset value, end of period............................ $ 23.24 $ 19.81
======== ========
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION CHARGES)........ 17.31%(b) 23.67%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)......................... $438,495 $409,107
Ratio of expenses to average net assets................... 1.08%(c) 1.10%
Ratio of net investment income (loss) to average net
assets................................................. (0.33)%(c) (0.33)%
Portfolio turnover (a).................................... 31.56% 50.51%
</TABLE>
---------------
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(b) Not Annualized.
(c) Annualized.
14
<PAGE> 16
LARGE CAP ULTRA FUND -- CLASS I (CONTINUED)
<TABLE>
<CAPTION>
ELEVEN
MONTHS DECEMBER 28, 1995
ENDED YEAR ENDED TO
MAY 31, 1998 JUNE 30, 1997 JUNE 30, 1996 (a)
------------ ------------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............. $ 14.48 $ 11.25 $ 10.00
-------- -------- --------
INVESTMENT ACTIVITIES
Net investment income (loss)................... (0.03) 0.03 0.03
Net realized and unrealized gains (losses) from
investments................................. 3.52 3.31 1.25
-------- -------- --------
Total from Investment Activities.......... 3.49 3.34 1.28
-------- -------- --------
DISTRIBUTIONS
Net investment income.......................... (1.67) (0.03) (0.03)
Net realized gains............................. -- (0.08) --
Tax return of capital.......................... (0.03) -- --
-------- -------- --------
Total Distributions....................... (1.70) (0.11) (0.03)
-------- -------- --------
Net Asset Value, End of Period................... $ 16.27 $ 14.48 $ 11.25
======== ======== ========
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION
CHARGES)....................................... 26.18% 29.81% 12.86%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).............. $358,221 $338,388 $274,150
Ratio of expenses to average net assets........ 1.10%(c) 1.12% 2.19%(c)
Ratio of net investment income (loss) to
average net assets.......................... (0.19)%(c) 0.19% 1.26%(c)
Ratio of expenses to average net assets*....... (d) (d) 2.26%(c)
Portfolio turnover (e)......................... 24.74% 48.44% 0.86%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) No fees were waived during this period.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
15
<PAGE> 17
U.S. GOVERNMENT INCOME FUND -- CLASS I
<TABLE>
<CAPTION>
ELEVEN
MONTHS
SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED
NOVEMBER 30, 1999 MAY 31, 1999 MAY 31, 1998 JUNE 30, 1997
----------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $ 9.13 $ 9.27 $ 9.15 $ 9.25
-------- -------- -------- --------
INVESTMENT ACTIVITIES
Net investment income (loss)...... 0.27 0.57 0.63 0.72
Net realized and unrealized gains
(losses) from investments...... (0.17) (0.14) 0.08 (0.10)
-------- -------- -------- --------
Total from Investment
Activities................ 0.10 0.43 0.71 0.62
-------- -------- -------- --------
DISTRIBUTIONS
Net investment income............. (0.27) (0.57) (0.55) (0.61)
Tax return of capital............. -- -- (0.04) (0.11)
-------- -------- -------- --------
Total Distributions............... (0.27) (0.57) (0.59) (0.72)
-------- -------- -------- --------
Net Asset Value, End of Period...... $ 8.96 $ 9.13 $ 9.27 $ 9.15
======== ======== ======== ========
TOTAL RETURN (EXCLUDES SALES AND
REDEMPTION CHARGES)............... 1.14% 4.73% 8.04%(a) 6.91%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period
(000).......................... $147,568 $150,113 $161,567 $148,854
Ratio of expenses to average net
assets......................... 0.83%(b) 0.75% 0.75%(b) 0.77%
Ratio of net investment income
(loss) to average net assets... 6.01%(b) 6.15% 7.44%(b) 7.90%
Ratio of expenses to average net
assets*........................ 1.23%(b) 1.09% 1.09%(b) 1.11%
Portfolio turnover (c)............ 45.86% 52.60% 278.94% 499.53%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
16
<PAGE> 18
U.S. GOVERNMENT INCOME FUND -- CLASS I (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
------------- ------------- -------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................. $ 9.42 $ 9.41 $ 10.04
-------- -------- --------
INVESTMENT ACTIVITIES
Net investment income (loss)....................... 0.75 0.76 0.74
Net realized and unrealized gains (losses) from
investments..................................... (0.17) 0.01 (0.63)
-------- -------- --------
Total from Investment Activities.............. 0.58 0.77 0.11
-------- -------- --------
DISTRIBUTIONS
Net investment income.............................. (0.67) (0.68) (0.73)
Tax return of capital.............................. (0.08) (0.08) (0.01)
-------- -------- --------
Total Distributions........................... (0.75) (0.76) (0.74)
-------- -------- --------
Net Asset Value, End of Period..................... $ 9.25 $ 9.42 $ 9.41
======== ======== ========
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION
CHARGES)........................................... 6.34% 8.70% 1.04%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).................. $130,615 $110,190 $101,506
Ratio of expenses to average net assets............ 0.76% 0.83% 0.72%
Ratio of net investment income (loss) to average
net assets...................................... 7.94% 8.25% 7.51%
Ratio of expenses to average net assets*........... 1.10% 1.19% 1.11%
Portfolio turnover (a)............................. 348.01% 114.71% 102.24%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
17
<PAGE> 19
MICHIGAN MUNICIPAL BOND FUND -- CLASS I
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1999 MAY 31, 1999
----------------- ------------
<S> <C> <C>
Net Asset Value, Beginning of Period........................ $ 10.91 $ 11.06
-------- --------
INVESTMENT ACTIVITIES
Net investment income (loss).............................. 0.23 0.47
Net realized and unrealized gains (losses) from
investments............................................ (0.34) (0.08)
-------- --------
Total from Investment Activities....................... (0.11) 0.39
-------- --------
DISTRIBUTIONS
Net investment income..................................... (0.23) (0.47)
Net realized gains........................................ -- (0.07)
-------- --------
Total distributions.................................... (0.23) (0.54)
-------- --------
Net asset value, end of period............................ $ 10.57 $ 10.91
======== ========
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION CHARGES)........ (0.98)%(b) 3.54%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)......................... $173,788 $192,536
Ratio of expenses to average net assets................... 0.82%(c) 0.76%
Ratio of net investment income (loss) to average net
Assets................................................. 4.35%(c) 4.21%
Ratio of expenses to average net assets*.................. 1.01%(c) 1.05%
Portfolio turnover (a).................................... 4.39% 6.52%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(b) Not annualized.
(c) Annualized.
18
<PAGE> 20
MICHIGAN MUNICIPAL BOND FUND --CLASS I (CONTINUED)
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED YEAR ENDED
MAY 31, 1998 JUNE 30, 1997
------------------- -------------
<S> <C> <C>
Net Asset Value, Beginning of Period........................ $ 10.89 $ 10.77
-------- --------
INVESTMENT ACTIVITIES
Net investment income (loss).............................. 0.44 0.51
Net realized and unrealized gains (losses) from
Investments............................................ 0.23 0.14
-------- --------
Total from Investment Activities....................... 0.67 0.65
-------- --------
DISTRIBUTIONS
Net investment income..................................... (0.47) (0.49)
Net realized gains........................................ (0.03) (0.04)
-------- --------
Total distributions.................................... (0.50) (0.53)
-------- --------
Net asset value, end of period.............................. $ 11.06 $ 10.89
======== ========
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION CHARGES)........ 6.30%(a) 6.11%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)......................... $206,246 $194,950
Ratio of expenses to average net assets................... 0.74%(b) 0.76%
Ratio of net investment income (loss) to average net
assets................................................. 4.34%(b) 4.73%
Ratio of expenses to average net assets*.................. 1.03%(b) 1.05%
Portfolio turnover (c).................................... 26.24% 28.48%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
19
<PAGE> 21
MICHIGAN MUNICIPAL BOND FUND -- CLASS I (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED NOVEMBER 30, YEAR ENDED
JUNE 30, 1996 1995 JUNE 30, 1994
------------- ------------ -------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................. $ 10.76 $ 10.53 $ 10.97
-------- -------- --------
INVESTMENT ACTIVITIES
Net investment income (loss)....................... 0.50 0.50 0.48
Net realized and unrealized gains (losses) from
investments..................................... 0.04 0.25 (0.36)
-------- -------- --------
Total from Investment Activities.............. 0.54 0.75 0.12
-------- -------- --------
DISTRIBUTIONS
Net investment income.............................. (0.50) (0.50) (0.46)
Net realized gains................................. (0.03) (0.02) (0.01)
In excess of net realized gains.................... -- -- (0.09)
-------- -------- --------
Total Distributions........................... (0.53) (0.52) (0.56)
-------- -------- --------
Net Asset Value, End of Period....................... $ 10.77 $ 10.76 $ 10.53
======== ======== ========
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION
CHARGES)........................................... 5.12% 7.33% 1.02%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).................. $185,191 $176,068 $181,051
Ratio of expenses to average net assets............ 0.77% 0.78% 0.75%
Ratio of net investment income (loss) to average
net assets...................................... 4.57% 4.79% 4.35%
Ratio of expenses to average net assets*........... 1.06% 1.07% 1.04%
Portfolio turnover (a)............................. 27.66% 26.06% 6.69%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.
ARM-B-003-01000
20
<PAGE> 22
ARMADA FUNDS
A, B AND C SHARES (RETAIL)
Prospectus dated December 10, 1999
(as revised on June 10, 2000 and June 16, 2000)
THIS SUPPLEMENT PROVIDES NEW AND ADDITIONAL INFORMATION BEYOND THAT CONTAINED IN
THE
PROSPECTUS AND SHOULD BE RETAINED AND READ IN CONJUNCTION WITH SUCH PROSPECTUS.
1. Effective June 9, 2000, the new name of the Armada Enhanced Income Fund is
the Armada Limited Maturity Bond Fund.
2. The Average Annual Total Returns chart for the Armada Small Cap Value Fund
(page 6) is deleted and replaced with the following information as of
12/31/98:
<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(3) -6.43% 14.60%(2)
-----------------------------------------------------------------------------
</TABLE>
(1) Since August 15, 1994.
(2) Since August 31, 1994.
(3) The Russell 2000 Value Index is comprised of securities in
the Russell 2000 Stock Index with a less than average
growth orientation.
3. The Average Annual Total Returns chart for the Armada Small Cap Growth Fund
(page 9) is deleted and replaced with the following information as of
12/31/98:
<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(3) 1.23% 2.36%(2)
------------------------------------------------------------------------------
</TABLE>
(1) Since August 1, 1997.
(2) Since July 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.
1
<PAGE> 23
4. Effective June 9, 2000, the "Calendar Year Total Returns -- Class A Shares"
bar chart, Best Quarter/ Worst Quarter information, performance as of
September 30, 1999 and Average Annual Total Returns for the Armada Bond Fund
(page 31) are deleted and replaced with the following information:
CALENDAR YEAR TOTAL RETURNS - CLASS A SHARES
[GRAPH]
<TABLE>
<CAPTION>
%
---------------
<S> <C>
1990 8.12
1991 15.03
1992 6.24
1993 9.89
1994 -3.64
1995 17.08
1996 3.13
1997 9.06
1998 7.28
1999 -6.67
</TABLE>
<TABLE>
<S> <C> <C>
Best quarter 6.13% (6/30/95)
--------------------------------------------------------------------------
Worst quarter -2.62% (3/31/94)
--------------------------------------------------------------------------
</TABLE>
This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the Lehman Brothers Aggregate Bond Index.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Armada Bond Fund -- A Shares -6.67% 5.68% 6.31% 6.60%(1)
--------------------------------------------------------------------------------
Armada Bond Fund -- B Shares -7.38% 6.03% N/A 4.19%(2)
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond
Index(3) -0.83% 7.73% 7.70% 8.06%(1)
--------------------------------------------------------------------------------
</TABLE>
(1) Since October 31, 1988.
(2) Since February 4, 1994.
(3) The Lehman Brothers 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.
2
<PAGE> 24
5. Effective June 10, 2000, the sentence under "Performance Information" for the
Armada Mid Cap Growth Fund (page 66) is deleted and replaced with the
following 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 bar chart shows changes in the performance of the Fund's Class A Shares from
year to year. The returns for Class B Shares were different than those shown
below due to differences in expenses.
The bar chart does not reflect sales charges. If sales charges had been
reflected, returns would be less than those shown below.
CALENDAR YEAR TOTAL RETURNS
[GRAPH]
<TABLE>
<CAPTION>
%
------------------
<S> <C>
1990 -3.31
1991 27.60
1992 15.22
1993 12.89
1994 -5.43
1995 29.58
1996 18.53
1997 11.60
1998 11.04
1999 37.44
</TABLE>
<TABLE>
<S> <C> <C>
Best quarter 34.98% (12/31/99)
--------------------------------------------------------------------------
Worst quarter -19.28% (9/30/98)
--------------------------------------------------------------------------
</TABLE>
This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the Russell Midcap Growth Index.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Armada Mid Cap Growth Fund -- A
Shares 37.44% 21.21% 14.79% 16.25%(1)
----------------------------------------------------------------------------------
Armada Mid Cap Growth Fund -- B
Shares 39.47% 21.69% N/A 17.11%(2)
----------------------------------------------------------------------------------
Russell Midcap Growth Index(3) 51.30% 28.02% 18.95% 19.84%(1)
----------------------------------------------------------------------------------
</TABLE>
(1) Since October 31, 1988.
(2) Since February 4, 1994.
(3) The Russell Midcap Growth Index is a market value-weighted
index that tracks the continuous price-only performance of
the securities of the smallest 800 companies in the
Russell 1000.
3
<PAGE> 25
6. Effective June 10, 2000, the sentence under "Performance Information" for the
Armada Large Cap Ultra Fund (page 68) is deleted and replaced with the
following 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 bar chart shows changes in the performance of the Fund's Class A Shares from
year to year. The returns for Class B Shares were different than those shown
below due to differences in expenses.
The bar chart does not reflect sales charges. If sales charges had been
reflected, returns would be less than those shown below.
CALENDAR YEAR TOTAL RETURNS
[GRAPH]
<TABLE>
<CAPTION>
%
------------------
<S> <C>
1997 28.76
1998 42.37
1999 21.45
</TABLE>
<TABLE>
<S> <C> <C>
Best quarter 25.48% (12/31/98)
--------------------------------------------------------------------------
Worst quarter -9.17% (9/30/98)
--------------------------------------------------------------------------
</TABLE>
This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the S&P/Barra Growth Index.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
1 YEAR SINCE INCEPTION
------------------------------------------------------------------------------
<S> <C> <C>
Armada Large Cap Ultra Fund -- A Shares 21.45% 28.30%(1)
------------------------------------------------------------------------------
Armada Large Cap Ultra Fund -- B Shares 22.53% 28.87%(1)
------------------------------------------------------------------------------
S&P/Barra Growth Index(3) 28.26% 32.06%(2)
------------------------------------------------------------------------------
</TABLE>
(1) Since February 1, 1996.
(2) Since January 31, 1996.
(3) The S&P/Barra Growth Index is constructed by dividing the
stocks in the S&P 500 Composite Index by a single
attribute: price-to-book ratio. The S&P/Barra Growth Index
has firms with higher price-to-book ratios. Like the S&P
500 Composite Index, the S&P/Barra Growth Index is market
capitalization-weighted, meaning that each stock is
weighted in the appropriate index in proportion to its
market value.
4
<PAGE> 26
7. Effective June 10, 2000, the sentence under "Performance Information" for the
Armada U.S. Government Income Fund (page 70) is deleted and replaced with the
following 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 bar chart shows changes in the performance of the Fund's Class A Shares from
year to year. The returns for Class B Shares were different than those shown
below due to differences in expenses.
The bar chart does not reflect sales charges. If sales charges had been
reflected, returns would be less than those shown below.
CALENDAR YEAR TOTAL RETURNS
[GRAPH]
<TABLE>
<CAPTION>
%
------------------
<S> <C>
1993 7.41
1994 -0.70
1995 13.50
1996 4.54
1997 7.84
1998 6.80
1999 -3.80
</TABLE>
<TABLE>
<S> <C> <C>
Best quarter 3.88% (6/30/95)
--------------------------------------------------------------------------
Worst quarter -1.13% (3/31/94)
--------------------------------------------------------------------------
</TABLE>
This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the Lehman Brothers Mortgage-Backed
Securities Index.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
1 YEAR 5 YEARS SINCE INCEPTION
------------------------------------------------------------------------------
<S> <C> <C> <C>
Armada U.S. Government Income Fund -- A
Shares -3.80% 5.62% 4.90%(1)
------------------------------------------------------------------------------
Armada U.S. Government Income Fund -- B
Shares -4.57% 5.89% 4.61%(2)
------------------------------------------------------------------------------
Lehman Brothers Mortgage-Backed Securities
Index(4) 1.85% 7.98% 6.50%(3)
------------------------------------------------------------------------------
</TABLE>
(1) Since November 12, 1992.
(2) Since February 4, 1994.
(3) Since November 31, 1992.
(4) The Lehman Brothers Mortgage-Backed Securities Index
includes all fixed-rate securities backed by mortgage
pools of the Government National Mortgage Association
(GNMA), Federal Home Loan Mortgage Corporation (FHLMC),
and Federal National Mortgage Association (FNMA).
Graduated Payment Mortgages (GPMs) are included, but
Graduated Equity Mortgages (GEMs) are not.
5
<PAGE> 27
8. Effective June 10, 2000, the sentence under "Performance Information" for the
Armada Michigan Municipal Bond Fund (page 72) is deleted and replaced with
the following 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 bar chart shows changes in the performance of the Fund's Class A Shares from
year to year. The returns for Class B Shares were different than those shown
below due to differences in expenses.
The bar chart does not reflect sales charges. If sales charges had been
reflected, returns would be less than those shown below.
CALENDAR YEAR TOTAL RETURNS
[GRAPH]
<TABLE>
<CAPTION>
%
------------------
<S> <C>
1991 9.78
1992 6.98
1993 9.67
1994 -3.00
1995 13.24
1996 2.84
1997 6.91
1998 4.75
1999 -6.25
</TABLE>
<TABLE>
<S> <C> <C>
Best quarter 5.19% (3/31/95)
--------------------------------------------------------------------------
Worst quarter -3.27% (3/31/94)
--------------------------------------------------------------------------
</TABLE>
This table compares the Fund's average annual total returns for the periods
ended December 31, 1999 to those of the Lehman Brothers 7-year Municipal Bond
Index.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
1 YEAR 5 YEARS SINCE INCEPTION
------------------------------------------------------------------------------
<S> <C> <C> <C>
Armada Michigan Municipal Bond Fund -- A
Shares -6.25% 4.10% 4.90%(1)
------------------------------------------------------------------------------
Armada Michigan Municipal Bond Fund -- B
Shares -7.05% 4.38% 2.90%(2)
------------------------------------------------------------------------------
Lehman Brothers 7-Year Municipal Bond
Index(4) -0.41% 6.36% 6.56%(3)
------------------------------------------------------------------------------
</TABLE>
(1) Since July 2, 1990.
(2) Since February 4, 1994.
(3) Since June 30, 1990.
(4) The Lehman Brothers 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.
6
<PAGE> 28
9. Effective June 16, 2000, the sentence under "Performance Information" for the
Armada Treasury Plus Money Market Fund (page 74) is deleted and replaced with
the following 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 bar chart shows changes in the performance of the Fund's Class A Shares from
year to year.
The bar chart does not reflect sales charges. If sales charges had been
reflected, returns would be less than those shown below.
CALENDAR YEAR TOTAL RETURNS
[GRAPH]
<TABLE>
<CAPTION>
%
------------------
<S> <C>
1994 3.60
1995 5.32
1996 4.79
1997 4.96
1998 4.86
1999 4.34
</TABLE>
<TABLE>
<S> <C> <C>
Best quarter 1.34% (6/30/95)
--------------------------------------------------------------------------
Worst quarter 0.63% (3/31/94)
--------------------------------------------------------------------------
</TABLE>
This table shows the Fund's average annual total returns for the periods ended
December 31, 1999.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
1 YEAR 5 YEARS SINCE INCEPTION
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Armada Treasury Plus Money Market Fund 4.34% 4.85% 4.61%(1)
-------------------------------------------------------------------------------
</TABLE>
(1) Since December 1, 1993.
10. Effective June 12, 2000, the sixth item under "Waiver of Front-End Sales
Charge -- Class A Shares" (page 85) is deleted and replaced with the
following:
- when shares are purchased through certain broker-dealers who have agreed
to provide certain services with respect to shares of the Funds,
including Charles Schwab Mutual Fund Marketplace(TM). Check with your
broker-dealer to see if you qualify for this exemption.
7
<PAGE> 29
11. On June 9, 2000, the Parkstone Bond Fund was reorganized into the Armada
Bond Fund. In connection with this reorganization, the Armada Bond Fund
adopted the financial highlights, financial statements and performance
history of the Parkstone Bond Fund. The Financial Highlights tables set
forth below replace the information on page 101 and present unaudited
financial information for the six-month period ended November 30, 1999, and
audited financial information for the past five fiscal years or periods. The
information for the semi-annual period ended November 30, 1999 is unaudited,
and such information, along with the Parkstone Bond Fund's financial
statements is included in the Parkstone Bond Fund's Semi-Annual Report and
incorporated by reference into the SAI. The information for the past five
fiscal years or periods has been audited by PricewaterhouseCoopers LLP,
independent auditors, whose report, along with the Parkstone Bond Fund's
financial information, is included in the Parkstone Bond Fund's Annual
Report and incorporated by reference into the SAI. The Trust's SAI and the
Parkstone Bond Fund's Annual and Semi-Annual Reports are available free of
charge by calling 1-800-622-FUND (3863).
BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1999 MAY 31, 1999
------------------- ------------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 9.95 $ 9.93 $ 10.27 $ 10.25
------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income (loss).................... 0.28 0.24 0.53 0.47
Net realized and unrealized gains (losses) from
investments.................................. (0.24) (0.24) (0.29) (0.30)
------- ------- ------- -------
Total from investment activities........... 0.04 0.00 0.24 0.17
------- ------- ------- -------
DISTRIBUTIONS
Net investment income........................... (0.28) (0.23) (0.54) (0.47)
Net realized gains.............................. -- -- (0.02) (0.02)
------- ------- ------- -------
Total distributions........................ (0.28) (0.23) (0.56) (0.49)
------- ------- ------- -------
Net asset value, end of period.................... $ 9.71 $ 9.70 $ 9.95 $ 9.93
======= ======= ======= =======
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION
CHARGES)........................................ 0.32%(b) 0.06%(b) 2.55% 1.66%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)............... $ 8,191 $ 3,272 $11,916 $ 4,548
Ratio of expenses to average net assets......... 1.19%(c) 1.94%(c) 1.19% 1.94%
Ratio of net investment income (loss) to average
net assets................................... 5.65%(c) 4.90%(c) 5.29% 4.53%
Ratio of expenses to average net assets*........ 1.24%(c) 1.99%(c) 1.28% 2.03%
Portfolio turnover (a).......................... 53.86% 53.86% 268.66% 268.66%
</TABLE>
---------------
The performance set forth in this table is the financial data of the Parkstone
Bond Fund, series of a predecessor company, the Parkstone Group of Funds. Armada
Bond Fund acquired the assets and assumed the liabilities of Parkstone Bond Fund
on June 9, 2000. The net asset values at the beginning of each period and the
changes in net asset values, including the net asset values at the end of each
period listed have been restated to reflect the conversion ratios of .9725738
for Class A, and .9756871 for Class B on the date of reorganization.
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(b) Not annualized.
(c) Annualized.
8
<PAGE> 30
BOND FUND (CONTINUED)
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED YEAR ENDED
MAY 31, 1998 JUNE 30, 1997
------------------- ------------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 9.95 $ 9.93 $ 9.78 $ 9.75
------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income (loss).................... 0.53 0.47 0.58 0.51
Net realized and unrealized gains (losses) from
investments.................................. 0.33 0.33 0.17 0.16
------- ------- ------- -------
Total from investment activities........... 0.86 0.80 0.75 0.67
------- ------- ------- -------
DISTRIBUTIONS
Net investment income........................... (0.54) (0.48) (0.58) (0.49)
------- ------- ------- -------
Total distributions........................ (0.54) (0.48) (0.58) (0.49)
------- ------- ------- -------
Net asset value, end of period.................... $ 10.27 $ 10.25 $ 9.95 $ 9.93
======= ======= ======= =======
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION
CHARGES)........................................ 8.83%(a) 8.18%(a) 7.92% 7.09%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)............... $16,669 $ 6,423 $19,760 $ 5,967
Ratio of expenses to average net assets......... 1.19%(b) 1.04%(b) 1.19% 1.94%
Ratio of net investment income (loss) to average
net assets................................... 5.81%(b) 5.07%(b) 5.88% 5.15%
Ratio of expenses to average net assets*........ 1.28%(b) 2.03%(b) 1.28% 2.03%
Portfolio turnover (c).......................... 545.68% 545.68% 827.00% 827.00%
</TABLE>
---------------
The performance set forth in this table is the financial data of the Parkstone
Bond Fund, series of a predecessor company, the Parkstone Group of Funds. Armada
Bond Fund acquired the assets and assumed the liabilities of Parkstone Bond Fund
on June 9, 2000. The net asset values at the beginning of each period and the
changes in net asset values, including the net asset values at the end of each
period listed have been restated to reflect the conversion ratios of .9725738
for Class A, and .9756871 for Class B on the date of reorganization.
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
9
<PAGE> 31
BOND FUND (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
----------------- ----------------- ---------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B (A)
------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 9.94 $ 9.92 $ 9.56 $ 9.49 $ 10.84 $10.20
------- ------- ------- ------- ------- ------
INVESTMENT ACTIVITIES
Net investment income
(loss).................... 0.59 0.51 0.60 0.53 0.61 0.23
Net realized and unrealized
gains (losses) from
investments............... (0.16) (0.17) 0.39 0.43 (0.74) (0.72)
------- ------- ------- ------- ------- ------
Total from investment
activities.............. 0.43 0.34 0.99 0.96 (0.13) (0.49)
------- ------- ------- ------- ------- ------
DISTRIBUTIONS
Net investment income........ (0.59) (0.51) (0.60) (0.53) (0.59) (0.22)
In excess of net realized
gains..................... -- -- (0.01) -- (0.56) --
------- ------- ------- ------- ------- ------
Total distributions..... (0.59) (0.51) (0.61) (0.53) (1.15) (0.22)
------- ------- ------- ------- ------- ------
Net asset value, end of
period.................... $ 9.78 $ 9.75 $ 9.94 $ 9.92 $ 9.56 $ 9.49
======= ======= ======= ======= ======= ======
TOTAL RETURN (EXCLUDES SALES
AND REDEMPTION CHARGES)...... 4.27% 3.46% 10.85% 10.62% (1.62)% (4.84)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000)..................... $20,175 $ 4,426 $17,572 $ 1,330 $18,391 $ 485
Ratio of expenses to average
net assets................ 1.19% 1.94% 1.24% 2.03% 0.98% 1.89%(c)
Ratio of net investment
income (loss) to average
net assets................ 5.71% 4.97% 6.32% 5.54% 5.86% 5.34%(c)
Ratio of expenses to average
net assets*............... 1.28% 2.03% 1.39% 2.39% 1.27% 2.29%(c)
Portfolio turnover (d)....... 1189.27% 1189.27% 1010.64% 1010.64% 893.27% 893.27%
</TABLE>
---------------
The performance set forth in this table is the financial data of the Parkstone
Bond Fund, series of a predecessor company, the Parkstone Group of Funds. Armada
Bond Fund acquired the assets and assumed the liabilities of Parkstone Bond Fund
on June 9, 2000. The net asset values at the beginning of each period and the
changes in net asset values, including the net asset values at the end of each
period listed have been restated to reflect the conversion ratios of .9725738
for Class A, and .9756871 for Class B on the date of reorganization.
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from February 4, 1994 (commencement of offering of Class B shares) to
June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
10
<PAGE> 32
12. The Mid Cap Growth, Large Cap Ultra, U.S. Government Income, Michigan
Municipal Bond and Treasury Plus Money Market Funds each began
operations as a separate portfolio (each, a "Predecessor Fund") of The
Parkstone Group of Funds. On June 10, 2000, the Mid Cap Growth, Large
Cap Ultra, U.S. Government Income and Michigan Municipal Bond Funds
were each reorganized as new portfolios of the Trust. Similarly, on
June 16, 2000, the Treasury Plus Money Market Fund was reorganized as a
new portfolio of the Trust. The Financial Highlights tables set forth
below present unaudited financial information for the six-month period
ended November 30, 1999, and audited financial information for the past
five fiscal years (or the period since a Predecessor Fund commenced
operations). The information for the semi-annual period ended November
30, 1999 is unaudited, and such information, along with the Predecessor
Funds' financial statements, is included in the Predecessor Funds'
Semi-Annual Report and incorporated by reference into the SAI. The
information for the past five fiscal years or periods has been audited
by PricewaterhouseCoopers LLP, independent auditors, whose report,
along with the Predecessor Funds' financial information, is included in
the Predecessor Funds' Annual Report and incorporated by reference into
the SAI. The Trust's SAI, and the Predecessor Funds' Annual and
Semi-Annual Reports, are available free of charge by calling
1-800-622-FUND (3863).
TREASURY PLUS MONEY MARKET FUND -- CLASS A
<TABLE>
<CAPTION>
SIX
MONTHS ELEVEN
ENDED MONTHS
NOVEMBER YEAR ENDED ENDED YEAR ENDED
30, 1999 MAY 31, 1999 MAY 31, 1998 JUNE 30, 1997
-------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period...... $1.000 $1.000 $ 1.000 $ 1.000
------ ------ -------- --------
INVESTMENT ACTIVITIES
Net investment income................... 0.022 0.044 0.045 0.047
DISTRIBUTIONS
Net investment income................... (0.022) (0.044) (0.045) (0.047)
------ ------ -------- --------
Net asset value, end of period.......... $1.000 $1.000 $ 1.000 $ 1.000
====== ====== ======== ========
TOTAL RETURN.............................. 2.19%(a) 4.51% 4.61%(a) 4.82%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)....... $9,573 $9,161 $240,208 $176,006
Ratio of expenses to average net
assets............................... 0.69%(b) 0.67% 0.67%(b) 0.67%
Ratio of net investment income to
average net assets................... 4.31%(b) 4.77% 4.90%(b) 4.72%
Ratio of expenses to average net
assets*.............................. 0.91%(b) 0.91% 0.92%(b) 0.92%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
11
<PAGE> 33
TREASURY PLUS MONEY MARKET FUND -- CLASS A
<TABLE>
<CAPTION>
DECEMBER 1, 1993
YEAR ENDED YEAR ENDED TO
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 (a)
------------- ------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period............. $ 1.000 $ 1.000 $ 1.000
-------- -------- -------
INVESTMENT ACTIVITIES............................ 0.049 0.047 0.016
DISTRIBUTIONS.................................... (0.049) (0.047) (0.016)
-------- -------- -------
Net asset value, end of period............ $ 1.000 $ 1.000 $ 1.000
======== ======== =======
TOTAL RETURN..................................... 5.04% 4.81% 1.66%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000).............. $158,723 $105,391 $56,535
Ratio of expenses to average net assets........ 0.70% 0.75% 0.64%(c)
Ratio of net investment income to average net
assets...................................... 4.87% 4.82% 2.84%(c)
Ratio of expenses to average net assets*....... 0.95% 1.04% 0.99%(c)
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
LARGE CAP ULTRA FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1999 MAY 31, 1999
------------------ ------------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............. $ 19.67 $ 19.21 $ 16.19 $ 15.95
------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income (loss)................... (0.10) (0.15) (0.11) (0.23)
Net realized and unrealized gains (losses) from
investments................................. 3.47 3.36 3.89 3.79
------- ------- ------- -------
Total from investment activities............ 3.37 3.21 3.78 3.56
------- ------- ------- -------
DISTRIBUTIONS
Net realized gains............................. -- -- (0.30) (0.30)
------- ------- ------- -------
Total distributions......................... -- -- (0.30) (0.30)
------- ------- ------- -------
Net asset value, end of period................. $ 23.04 $ 22.42 $ 19.67 $ 19.21
======= ======= ======= =======
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION
CHARGES)....................................... 17.13%(b) 16.71%(b) 23.42% 22.38%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000).............. $24,363 $15,935 $24,513 $14,128
Ratio of expenses to average net assets........ 1.33%(c) 2.08%(c) 1.35% 2.11%
Ratio of net investment income (loss) to
average net assets.......................... (0.58)%(c) (1.33)%(c) (0.59)% (1.34)%
Portfolio turnover (a)......................... 31.56% 31.56% 50.51% 50.51%
</TABLE>
---------------
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(b) Not Annualized.
(c) Annualized.
12
<PAGE> 34
LARGE CAP ULTRA FUND (CONTINUED)
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED YEAR ENDED DECEMBER 28, 1995
MAY 31, 1998 JUNE 30, 1997 JUNE 30, 1996 (A)
-------------------- ------------------ ------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
-------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 14.44 $ 14.34 $ 11.23 $11.22 $10.00 $ 10.00
------- ------- ------- ------ ------ -------
INVESTMENT ACTIVITIES
Net investment income (loss)... (0.06) (0.12) -- (0.05) 0.03 0.01
Net realized and unrealized
gains (losses) from
investments................. 3.51 3.43 3.30 3.25 1.23 1.23
------- ------- ------- ------ ------ -------
Total from investment
activities................ 3.45 3.31 3.30 3.20 1.26 1.24
------- ------- ------- ------ ------ -------
DISTRIBUTIONS
Net investment income.......... (1.67) (1.67) (0.01) -- (0.03) (0.02)
Net realized gains............. -- -- (0.08) (0.08) -- --
Tax return of capital.......... (0.03) (0.03) -- -- -- --
------- ------- ------- ------ ------ -------
Total distributions......... (1.70) (1.70) (0.09) (0.08) (0.03) (0.02)
------- ------- ------- ------ ------ -------
Net asset value, end of
period...................... $ 16.19 $ 15.95 $ 14.44 $14.34 $11.23 $ 11.22
======= ======= ======= ====== ====== =======
TOTAL RETURN (EXCLUDES SALES AND
REDEMPTION CHARGES)............ 25.95%(b) 25.12%(b) 29.52% 28.62% 8.99%(b) 8.77%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000)....................... $21,628 $10,169 $12,260 $4,130 $1,657 $ 832
Ratio of expenses to average
net assets.................. 1.35%(c) 2.09%(c) 1.37% 2.12% 1.40%(c) 1.78%(c)
Ratio of net investment income
(loss) to average net
assets...................... (0.45)%(c) (1.21)%(c) (0.14)% (0.88)% 0.31%(c) (0.32)%(c)
Ratio of expenses to average
net assets*................. (d) (d) (d) (d) 2.62%(c) 4.07%(c)
Portfolio turnover (e)......... 24.74% 24.74% 48.44% 48.44% 0.86% 0.86%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not Annualized.
(c) Annualized.
(d) No fees were waived during this period.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
13
<PAGE> 35
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1999 MAY 31, 1999
------------------ ------------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 9.13 $ 9.11 $ 9.27 $ 9.24
------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income (loss).................... 0.26 0.22 0.55 0.47
Net realized and unrealized gains (losses) from
investments.................................. (0.17) (0.17) (0.14) (0.13)
------- ------- ------- -------
Total from investment activities............. 0.09 0.05 0.41 0.34
------- ------- ------- -------
DISTRIBUTIONS
Net investment income........................... (0.26) (0.22) (0.55) (0.47)
------- ------- ------- -------
Total distributions.......................... (0.26) (0.22) (0.55) (0.47)
------- ------- ------- -------
Net asset value, end of period.................. $ 8.96 $ 8.94 $ 9.13 $ 9.11
======= ======= ======= =======
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION
CHARGES)........................................ 0.98%(b) 0.62%(b) 4.46% 3.76%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)............... $25,093 $11,839 $38,190 $16,373
Ratio of expenses to average net assets......... 1.08%(c) 1.83%(c) 1.00% 1.75%
Ratio of net investment income (loss) to average
net assets................................... 5.74%(c) 4.99%(c) 5.92% 5.15%
Ratio of expenses to average net assets*........ 1.47%(c) 2.22%(c) 1.34% 2.09%
Portfolio turnover (a).......................... 45.86% 45.86% 52.60% 52.60%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(b) Not annualized.
(c) Annualized.
14
<PAGE> 36
U.S. GOVERNMENT INCOME FUND (CONTINUED)
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED YEAR ENDED
MAY 31, 1998 JUNE 30, 1997
-------------------- ------------------
CLASS A CLASS B CLASS A CLASS B
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 9.15 $ 9.13 $ 9.25 $ 9.21
------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income (loss).................... 0.61 0.55 0.70 0.63
Net realized and unrealized gains (losses) from
investments.................................. 0.08 0.07 (0.10) (0.09)
------- ------- ------- -------
Total from investment activities............. 0.69 0.62 0.60 0.54
------- ------- ------- -------
DISTRIBUTIONS
Net investment income........................... (0.53) (0.47) (0.59) (0.52)
Tax return of capital........................... (0.04) (0.04) (0.11) (0.10)
------- ------- ------- -------
Total distributions.......................... (0.57) (0.51) (0.70) (0.62)
------- ------- ------- -------
Net asset value, end of period.................. $ 9.27 $ 9.24 $ 9.15 $ 9.13
======= ======= ======= =======
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION
CHARGES)........................................ 7.80%(a) 6.98%(a) 6.86% 6.06%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)............... $54,710 $23,739 $58,589 $23,448
Ratio of expenses to average net assets......... 1.00%(b) 1.75%(b) 1.02% 1.77%
Ratio of net investment income (loss) to average
net assets................................... 7.20%(b) 6.45%(b) 7.64% 6.89%
Ratio of expenses to average net assets*........ 1.34%(b) 2.09%(b) 1.36% 2.11%
Portfolio turnover (c).......................... 278.94% 278.94% 499.53% 499.53%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
15
<PAGE> 37
U.S. GOVERNMENT INCOME FUND (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
----------------- ----------------- ---------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B (a)
------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 9.42 $ 9.39 $ 9.41 $ 9.38 $ 10.04 $ 9.88
------- ------- ------- ------ ------- ------
INVESTMENT ACTIVITIES
Net investment income
(loss)..................... 0.73 0.66 0.75 0.68 0.74 0.28
Net realized and unrealized
gains (losses) from
investments................ (0.17) (0.18) -- 0.01 (0.64) (0.50)
------- ------- ------- ------ ------- ------
Total from investment
activities............... 0.56 0.48 0.75 0.69 0.10 (0.22)
------- ------- ------- ------ ------- ------
DISTRIBUTIONS
Net investment income......... (0.65) (0.59) (0.66) (0.61) (0.72) (0.27)
Tax return of capital......... (0.08) (0.07) (0.08) (0.07) (0.01) (0.01)
------- ------- ------- ------ ------- ------
Total distributions........ (0.73) (0.66) (0.74) (0.68) (0.73) (0.28)
------- ------- ------- ------ ------- ------
Net asset value, end of
period..................... $ 9.25 $ 9.21 $ 9.42 $ 9.39 $ 9.41 $ 9.38
======= ======= ======= ====== ======= ======
TOTAL RETURN (EXCLUDES SALES AND
REDEMPTION CHARGES)........... 5.97% 5.22% 8.46% 7.71% 0.94% (2.26)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000)...................... $52,250 $19,556 $50,931 $8,478 $54,027 $2,787
Ratio of expenses to average
net assets................. 1.01% 1.76% 1.04% 1.83% 0.82% 1.77%(c)
Ratio of net investment income
(loss) to average net
assets..................... 7.70% 6.92% 8.03% 7.28% 7.42% 6.72%(c)
Ratio of expenses to average
net assets*................ 1.35% 2.10% 1.44% 2.44% 1.36% 2.42%(c)
Portfolio turnover (d).......... 348.01% 348.01% 114.71% 114.71% 102.24% 102.24%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from February 4, 1994 (commencement of offering of Class B shares) to
June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
16
<PAGE> 38
MICHIGAN MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED MAY 31,
NOVEMBER 30, 1999 1999
------------------ ------------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 10.91 $10.92 $ 11.06 $11.07
------- ------ ------- ------
INVESTMENT ACTIVITIES
Net investment income (loss)...................... 0.22 0.18 0.44 0.36
Net realized and unrealized gains (losses) from
investments.................................... (0.35) (0.35) (0.08) (0.08)
------- ------ ------- ------
Total from investment activities............... (0.13) (0.17) 0.36 0.28
------- ------ ------- ------
DISTRIBUTIONS
Net investment income............................. (0.22) (0.18) (0.44) (0.36)
Net realized gains................................ -- -- (0.07) (0.07)
------- ------ ------- ------
Total distributions............................ (0.22) (0.18) (0.51) (0.43)
------- ------ ------- ------
Net asset value, end of period.................... $ 10.56 $10.57 $ 10.91 $10.92
======= ====== ======= ======
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION
CHARGES).......................................... (1.20)%(b)(1.57)%(b) 3.38% 2.52%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)................. $21,274 $2,236 $28,305 $3,217
Ratio of expenses to average net assets........... 1.07%(c) 1.81%(c) 1.01% 1.76%
Ratio of net investment income (loss) to average
net assets..................................... 4.09%(c) 3.34%(c) 3.96% 3.21%
Ratio of expenses to average net assets*.......... 1.25%(c) 2.00%(c) 1.29% 2.05%
Portfolio turnover (a)............................ 4.39% 4.39% 6.52% 6.52%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(b) Not annualized.
(c) Annualized.
17
<PAGE> 39
MICHIGAN MUNICIPAL BOND FUND (CONTINUED)
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED YEAR ENDED
MAY 31, 1998 JUNE 30, 1997
------------------- ------------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 10.89 $ 10.90 $ 10.76 $10.76
------- ------- ------- ------
INVESTMENT ACTIVITIES
Net investment income (loss)..................... 0.42 0.34 0.49 0.41
Net realized and unrealized gains (losses) from
investments................................... 0.23 0.23 0.14 0.13
------- ------- ------- ------
Total from investment activities.............. 0.65 0.57 0.63 0.54
------- ------- ------- ------
DISTRIBUTIONS
Net investment income............................ (0.45) (0.37) (0.46) (0.36)
Net realized gains............................... (0.03) (0.03) (0.04) (0.04)
------- ------- ------- ------
Total distributions........................... (0.48) (0.40) (0.50) (0.40)
------- ------- ------- ------
Net asset value, end of period................... $ 11.06 $ 11.07 $ 10.89 $10.90
======= ======= ======= ======
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION
CHARGES)......................................... 5.96%(a) 5.32%(a) 5.89% 5.05%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)................ $38,536 $ 3,983 $38,302 $3,503
Ratio of expenses to average net assets.......... 0.99%(b) 1.74%(b) 1.01% 1.76%
Ratio of net investment income (loss) to average
net assets.................................... 4.09%(b) 3.34%(b) 4.48% 3.73%
Ratio of expenses to average net assets*......... 1.28%(b) 2.03%(b) 1.30% 2.05%
Portfolio turnover (c)........................... 26.24% 26.24% 28.48% 28.48%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
18
<PAGE> 40
MICHIGAN MUNICIPAL BOND FUND (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1996 NOVEMBER 30, 1995 JUNE 30, 1994
------------------ ------------------ ----------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B (a)
------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 10.75 $10.75 $ 10.53 $10.52 $ 10.97 $11.09
------- ------ ------- ------ ------- ------
INVESTMENT ACTIVITIES
Net investment income
(loss)..................... 0.47 0.40 0.48 0.40 0.47 0.16
Net realized and unrealized
gains (losses) from
investments................ 0.04 0.04 0.23 0.24 (0.36) (0.57)
------- ------ ------- ------ ------- ------
Total from investment
activities............... 0.51 0.44 0.71 0.64 0.11 (0.41)
------- ------ ------- ------ ------- ------
DISTRIBUTIONS
Net investment income......... (0.47) (0.40) (0.48) (0.40) (0.45) (0.16)
Net realized gains............ (0.03) (0.03) (0.01) (0.01) (0.01) --
In excess of net realized
gains...................... -- -- -- -- (0.09) --
------- ------ ------- ------ ------- ------
Total distributions........ (0.50) (0.43) (0.49) (0.41) (0.55) (0.16)
------- ------ ------- ------ ------- ------
Net asset value, end of
period..................... $ 10.76 $10.76 $ 10.75 $10.75 $ 10.53 $10.52
======= ====== ======= ====== ======= ======
TOTAL RETURN (EXCLUDES SALES AND
REDEMPTION CHARGES)........... 4.87% 4.13% 6.99% 6.28% 0.92% (3.69)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000)...................... $36,681 $3,565 $37,874 $2,270 $42,204 $1,302
Ratio of expenses to average
net assets................. 1.02% 1.77% 1.00% 1.78% 0.85% 1.77%(c)
Ratio of net investment income
(loss) to average net
assets..................... 4.32% 3.57% 4.57% 3.80% 4.25% 3.51%(c)
Ratio of expenses to average
net assets*................ 1.31% 2.06% 1.32% 2.32% 1.29% 2.32%(c)
Portfolio turnover (d)........ 27.66% 27.66% 26.06% 26.06% 6.69% 6.69%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from February 4, 1994 (commencement of offering of Class B shares) to
June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
19
<PAGE> 41
MID CAP GROWTH FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1999 MAY 31, 1999
------------------- ------------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 14.10 $ 13.14 $ 14.98 $ 14.20
------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income (loss).................... (0.10) (0.14) (0.19) (0.28)
Net realized and unrealized gains (losses) from
investments.................................. 2.81 2.60 1.15 1.06
------- ------- ------- -------
Total from investment activities............. 2.71 2.46 0.96 0.78
------- ------- ------- -------
DISTRIBUTIONS
Net realized gains.............................. -- -- (1.84) (1.84)
------- ------- ------- -------
Total distributions.......................... -- -- (1.84) (1.84)
------- ------- ------- -------
Net asset value, end of period.................. $ 16.81 $ 15.60 $ 14.10 $ 13.14
======= ======= ======= =======
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION
CHARGES)........................................ 19.22%(b) 18.72%(b) 8.08% 7.19%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)............... $44,315 $16,585 $50,605 $16,629
Ratio of expenses to average net assets......... 1.60%(c) 2.35%(c) 1.57% 2.32%
Ratio of net investment income (loss) to average
net assets................................... (1.11)%(c) (1.85)%(c) (1.00)% (1.75)%
Portfolio turnover (a).......................... 52.62% 52.62% 100.19% 100.19%
</TABLE>
---------------
* Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(b) Not Annualized.
(c) Annualized.
20
<PAGE> 42
MID CAP GROWTH FUND (CONTINUED)
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED YEAR ENDED
MAY 31, 1998 JUNE 30,1997
------------------- ------------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period.............. $ 15.72 $ 15.12 $ 20.71 $ 20.28
------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income (loss).................... (0.14) (0.23) (0.16) (0.24)
Net realized and unrealized gains (losses) from
investments.................................. 2.51 2.42 1.30 1.21
------- ------- ------- -------
Total from investment activities............. 2.37 2.19 1.14 0.97
------- ------- ------- -------
DISTRIBUTIONS
Net realized gains.............................. (3.11) (3.11) (6.13) (6.13)
------- ------- ------- -------
Total distributions.......................... (3.11) (3.11) (6.13) (6.13)
------- ------- ------- -------
Net asset value, end of period.................. $ 14.98 $ 14.20 $ 15.72 $ 15.12
======= ======= ======= =======
TOTAL RETURN (EXCLUDES SALES AND REDEMPTION
CHARGES)........................................ 16.84%(a) 16.27%(a) 5.78% 4.94%
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)............... $90,183 $23,780 $80,634 $21,994
Ratio of expenses to average net assets......... 1.55%(b) 2.30%(b) 1.56% 2.31%
Ratio of net investment income (loss) to average
net assets................................... (1.02)%(b) (1.77)%(b) (1.05)% (1.80)%
Portfolio turnover (c).......................... 38.41% 38.41% 38.47% 38.47%
</TABLE>
---------------
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
21
<PAGE> 43
MID CAP GROWTH FUND (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994
----------------- ----------------- ---------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B (a)
------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $ 16.56 $ 16.35 $ 14.69 $14.63 $ 15.11 $16.66
------- ------- ------- ------ ------- ------
INVESTMENT ACTIVITIES
Net investment income (loss)........ (0.16) (0.23) (0.12) (0.11) (0.10) (0.05)
Net realized and unrealized gains
(losses) from investments........ 4.97 4.82 3.46 3.30 (0.28) (1.98)
------- ------- ------- ------ ------- ------
Total from investment
activities..................... 4.81 4.59 3.34 3.19 (0.38) (2.03)
------- ------- ------- ------ ------- ------
DISTRIBUTIONS
Net realized gains.................. (0.66) (0.66) (0.48) (0.48) (0.04) --
In excess of net realized gains..... -- -- (0.99) (0.99) -- --
------- ------- ------- ------ ------- ------
Total distributions.............. (0.66) (0.66) (1.47) (1.47) (0.04) --
------- ------- ------- ------ ------- ------
Net asset value, end of period...... $ 20.71 $ 20.28 $ 16.56 $16.35 $ 14.69 $14.63
======= ======= ======= ====== ======= ======
TOTAL RETURN (EXCLUDES SALES AND
REDEMPTION CHARGES)................. 29.57% 28.59% 24.85% 23.88% (2.57)% (12.18)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000)... $66,260 $15,840 $43,803 $6,073 $36,108 $1,616
Ratio of expenses to average net
assets........................... 1.54% 2.29% 1.51% 2.29% 1.38% 2.30%(c)
Ratio of net investment income
(loss) to average net assets..... (0.94)% (1.70)% (0.87)% (1.61)% (0.75)% (1.57)%(c)
Ratio of expenses to average net
assets*.......................... -- -- 1.54% 2.54% 1.53% 2.56%(c)
Ratio of net investment income
(loss) to average net assets*.... -- -- (0.90)% (1.87)% (0.90)% (1.83)%(c)
Portfolio turnover (d)................ 49.27% 49.27% 46.39% 46.39% 70.87% 70.87%
</TABLE>
---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from February 4, 1994 (commencement of offering of Class B shares) to
June 30, 1994.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.
ARM-D-004-02000
22
<PAGE> 44
ARMADA FUNDS
STATEMENT OF ADDITIONAL INFORMATION
JUNE 16, 2000
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 LIMITED MATURITY BOND 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 28, 1999 (as amended on June 10, 2000 and June
16, 2000) for Class I Shares of the Funds, and dated December 10, 1999 (as
amended on June 10, 2000 and June 16, 2000) for Class A, Class B and Class C
Shares of the Funds, as such Prospectuses may be amended or supplemented from
time to time. A copy of the Prospectuses may be obtained by calling or writing
the Trust at 1-800-622-FUND (3863), One Freedom Valley Drive, Oaks, Pennsylvania
19456.
<PAGE> 45
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION.................................................................1
INVESTMENT OBJECTIVE AND POLICIES...................................................................3
INVESTMENT LIMITATIONS.............................................................................63
NET ASSET VALUE....................................................................................66
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.....................................................68
DESCRIPTION OF SHARES..............................................................................79
ADDITIONAL INFORMATION CONCERNING TAXES............................................................84
TRUSTEES AND OFFICERS..............................................................................89
ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN SERVICES AND TRANSFER AGENCY AGREEMENTS..........93
SHAREHOLDER SERVICES PLANS........................................................................103
PORTFOLIO TRANSACTIONS............................................................................105
AUDITORS..........................................................................................107
COUNSEL...........................................................................................108
PERFORMANCE INFORMATION...........................................................................108
MISCELLANEOUS.....................................................................................117
FINANCIAL STATEMENTS..............................................................................153
APPENDIX A........................................................................................A-1
APPENDIX B........................................................................................B-1
</TABLE>
<PAGE> 46
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
This Statement of Additional Information should be read in
conjunction with the Prospectuses of the Trust that describes: the 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, Limited Maturity Bond (formerly, the
Enhanced Income) and Government Income Funds (collectively, the "Fixed Income
Funds"); Ohio Municipal Money Market Fund, Pennsylvania Tax Exempt Money Market,
Tax Exempt Money Market, Money Market, Government Money Market, and Treasury
Money Market and Treasury Plus Money Market Funds (collectively, the "Money
Market Funds"); the Ohio Tax Exempt Bond, Pennsylvania Municipal Bond, Michigan
Municipal Bond and National Tax Exempt Bond Funds (collectively, the "Tax-Exempt
Funds"). The information contained in this Statement of Additional Information
expands upon matters discussed in the Prospectuses. No investment in shares of a
Fund should be made without first reading the Prospectus for such Fund.
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 Money Market, Bond, GNMA and
Pennsylvania Municipal Bond Funds commenced operations as separate investment
portfolios (the "Predecessor Pennsylvania Tax Exempt Money Market," "Predecessor
Intermediate Government Fund," "Predecessor GNMA Fund," and "Predecessor
Pennsylvania Tax Exempt Bond Fund," and collectively, the "Predecessor Funds")
of Inventor Funds, Inc. On September 9, 1996, the Predecessor Funds were
reorganized as new portfolios of the Trust. References in this Statement of
Additional Information are to a Fund's current name.
On June 9, 2000, the Enhanced Income Fund changed its name to
the "Limited Maturity Bond Fund." References in this Statement of Additional
Information are to the Fund's current name.
On June 9, 2000, the Bond Fund was reorganized with the
Parkstone Bond Fund, a separate investment portfolio offered by The Parkstone
Group of Funds ("Parkstone"). In connection with this reorganization, the
financial statements and performance history of the Parkstone Bond Fund were
adopted by the Bond Fund. Historical information concerning performance in this
Statement of Additional Information is that of the Parkstone Bond Fund.
The Mid Cap Growth, Large Cap Ultra, U.S. Government Income
and Michigan Municipal Bond Funds commenced operations as separate investment
portfolios (the "Parkstone Mid Capitalization Fund," "Parkstone Large
Capitalization Fund," "Parkstone U.S. Government Income Fund" and "Parkstone
Michigan Municipal Bond Fund," and collectively, the "Parkstone Continuing
Funds") of Parkstone. On June 10, 2000, the Parkstone Continuing Funds were
<PAGE> 47
reorganized as new portfolios of the Trust. References in this Statement of
Additional Information are to a Fund's current name.
The Treasury Plus Money Market Fund commenced operations as a
separate investment portfolio, the Parkstone Treasury Fund, of Parkstone. On
June 16, 2000, the Parkstone Treasury Fund was reorganized as a new portfolio of
the Trust. References in this Statement of Additional Information are to the
Fund's current name.
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
Funds 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
-3-
<PAGE> 48
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 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.
-4-
<PAGE> 49
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.
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 comparable to that of companies in the S&P 500. 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.
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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.
The Fund will normally invest at least 80% of its total assets
in common stocks and other equity securities. The Fund's Adviser selects common
stocks based on a number of factors, including historical and projected
long-term earnings growth, earnings quality and liquidity, each in relation to
the market price of the stock. Stocks purchased for the 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
comparable to that of companies in the S&P 500. 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). The Fund will normally 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.
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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 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.
The Fund will normally 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
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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.
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.
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ARMADA EQUITY INCOME FUND
The Fund will normally invest at least 80% of the value of its
total assets 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. The Fund
normally invest in common stocks, fixed income securities, securities
convertible into common stocks (i.e., warrants, convertible preferred stock,
fixed rate preferred stock, convertible fixed income securities, options and
rights) and cash equivalent securities. The Fund intends to invest 50% to 70% 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 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.
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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 its objective by normally investing
at least 80% of its total assets in investment grade fixed-income securities.
The Fund uses the Lehman Aggregate Bond Index ("Lehman Aggregate") as its
performance benchmark. The average maturity of the Fund will be from four to
twelve years.
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. The
Fund normally maintains an average dollar-weighted portfolio maturity of three
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 its objective by normally 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 3 and 10
years. The Fund employs the Lehman GNMA Index as its performance benchmark.
ARMADA LIMITED MATURITY BOND 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. The Fund normally 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 Government/Corporate Bond Index is composed of U.S.
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Treasury and Agency bonds and U.S. fixed coupon investment grade corporate bonds
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).
The Fund normally will invest at least 80% of the value of its
Fund's total assets 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, the Fund will normally invest at least 80% of the value of its total
assets 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).
The Fund will normally 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."
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ARMADA NATIONAL TAX EXEMPT BOND FUND
The Fund will normally invest at least 80% of the value of its
total assets 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 three to ten years.
For temporary defensive or liquidity purposes when, in the
opinion of the Funds' adviser, Ohio Municipal Securities or Pennsylvania
Municipal Securities of sufficient quality, as the 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 Investment Company Act of 1940, as
amended (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.
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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 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.
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).
The Fund will normally invest at least 80% of the value of its
total assets in Ohio Municipal Securities. This policy is fundamental and may
not be changed without the affirmative vote of the holders of a majority of the
Fund's outstanding shares (as defined under "Shareholder Vote"). Dividends paid
by the Fund which are derived from interest properly attributable to Ohio
Municipal Securities will be exempt from regular federal income tax and Ohio
personal income tax. Dividends derived from interest on Municipal Securities of
other governmental issuers will be exempt from regular federal income tax but
may be subject to Ohio personal income tax. The Fund may invest up to 100% of
its assets in Municipal Securities known as private activity bonds (described
below) the interest on which is an item of tax preference for purposes of the
federal alternative minimum tax ("AMT Paper"). The Fund may also invest up to
100% of its assets in non-Ohio Municipal Securities and in taxable securities,
during temporary defensive periods when, in the opinion of the Adviser, Ohio
Municipal Securities of sufficient quality are unavailable.
The Ohio Municipal Money Market Fund is concentrated in
securities issued by the State of Ohio or entities within the State of Ohio, and
therefore, investment in the Fund may be riskier than an investment in other
types of money market funds.
See "Special Risk Considerations of the Ohio Municipal Money
Market Fund" below.
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<PAGE> 58
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 normally invests
its assets so that at least 80% of its annual interest income is not only exempt
from regular federal income tax and Pennsylvania personal income taxes, but is
not considered a preference item for purposes of the federal alternative minimum
tax. However, the Fund may invest up to 100% of its assets in non-Pennsylvania
Municipal Securities and in taxable securities, during temporary defensive
periods when, in the opinion of the Adviser, Pennsylvania Municipal Securities
of sufficient quality are unavailable.
The Pennsylvania Tax Exempt Money Market Fund is concentrated
in securities issued by the Commonwealth of Pennsylvania or entities within the
Commonwealth of Pennsylvania, and therefore, investment in the Fund may be
riskier than an investment in other types of money market funds.
See "Special Risk Considerations of the Pennsylvania Tax
Exempt Money Market Fund" below.
ARMADA TAX EXEMPT MONEY MARKET FUND
The Fund seeks to achieve its objective by investing
substantially all of its assets in a diversified fund of obligations issued by
or on behalf of states, territories and possessions of the United States, the
District of Columbia and their political subdivisions, agencies,
instrumentalities and authorities, the income from which, in the opinion of bond
counsel, is exempt from regular federal income tax ("Municipal Securities").
The Fund will normally invest at least 80% of the value of its
total assets 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
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<PAGE> 59
invest 25% or more of their respective net assets in Municipal Securities the
interest on which is paid solely from revenues of similar projects, the Funds do
not presently intend to do so unless in the opinion of the Adviser the
investment is warranted. The Ohio Municipal Money Market Fund may invest up to
100% of its assets in private activity bonds. In addition, although the
Pennsylvania Tax Exempt Money Market and Tax Exempt Money Market Funds may
invest up to 20% of their respective total assets in private activity bonds
(described below) and taxable investments, these Funds do not currently intend
to do so unless in the opinion of the Adviser the investment is warranted. To
the extent that a Fund's assets are invested in Municipal Securities that are
payable from the revenues of similar projects or are issued by issuers located
in the same state or are invested in private activity bonds, the Fund will be
subject to the peculiar risks presented by the laws and economic conditions
relating to such states, projects and bonds to a greater extent than it would be
if its assets were not so invested.
ARMADA MONEY MARKET FUND
The Fund seeks to achieve its objective by investing in "money
market" instruments such as certificates of deposit and other obligations issued
by domestic and foreign 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
The Fund normally 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. The Fund normally 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
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investment trusts, warrants, and short-term obligations (with maturities of 12
months or less) consisting of commercial paper (including variable amount master
demand notes), bankers' acceptances, certificates of deposit, repurchase
agreements, obligations issued or guaranteed by the U.S. government or, its
agencies or instrumentalities, and demand and time deposits of domestic and
foreign banks and savings and loan associations. The Fund may also hold
securities of other investment companies and depository or custodial receipts
representing beneficial interests in any of the foregoing securities.
Subject to the foregoing policies, the Fund may also invest up
to 25% of its net assets in foreign securities either directly or through the
purchase of American Depository Receipts ("ADRs"), European Depository Receipts
("EDRs"), Global Depository Receipts ("GDRs") and other similar global
instruments, and may also invest in securities issued by foreign branches of
U.S. banks and foreign banks, Canadian commercial paper and in U.S.
dollar-denominated commercial paper of a foreign issuer.
The Fund anticipates investing in growth-oriented,
medium-sized companies. Medium-sized companies are considered to be those with a
market capitalization comparable to companies in the Russell Mid Cap Growth
Index. 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
The Large Cap Ultra Fund normally 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.
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Subject to the foregoing policies, the Large Cap Ultra Fund
may also invest up to 25% of its net assets in foreign securities either
directly or through the purchase of American depository receipts ("ADRs") or
European depository receipts ("EDRs") and may also invest in securities issued
by foreign branches of U.S. banks and foreign banks, CCP, and in U.S.
dollar-denominated commercial paper of a foreign issuer.
The Large Cap Ultra Fund anticipates investing in
growth-oriented companies with large market capitalization, defined as
capitalization comparable to companies in the Standard & Poor's Barra Growth
Index. The Large Cap Ultra Fund will invest in companies that have typically
exhibited consistent, above-average growth in revenues and earnings, strong
management, and sound and improving financial fundamentals. Often, these
companies are market or industry leaders, have excellent products and/or
services, and exhibit the potential for growth. Core holdings of the Large Cap
Ultra Fund are in companies that participate in long-term growth industries,
although these will be supplemented by holdings in non-growth industries that
exhibit the desired characteristics.
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
The Fund will normally invest at least 80% of its total assets
in obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, although up to 20% of the value of its total assets may be
invested in debt securities and preferred stocks of non-governmental issuers.
The Fund also may invest up to 20% 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 3 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.
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<PAGE> 62
ARMADA MICHIGAN MUNICIPAL BOND FUND
As a fundamental policy, the Fund will normally invest at
least 80% of its net assets in a portfolio of securities exempt from Michigan
state taxes. The Fund may invest up to 100% of its assets in private activity
bonds which may be treated as a special tax preference item under the federal
alternative minimum tax.
"Michigan Municipal Securities" include debt obligations,
consisting of notes, bonds and commercial paper, issued by or on behalf of the
State of Michigan, its political subdivisions, municipalities and public
authorities, the interest on which is, in the opinion of bond counsel to the
issuer, exempt from federal income tax and Michigan state income taxes (but may
be treated as a preference item for individuals for purposes of the federal
alternative minimum tax) and debt obligations issued by the government of Puerto
Rico, the U.S. territories 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.
The Fund normally will be invested in long-term Michigan
Municipal Securities and 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
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<PAGE> 63
paper meeting the Fund's quality standards for tax-exempt commercial paper (as
described above), and such taxable obligations as may be subject to repurchase
agreements. These obligations are described further in the Statement of
Additional Information. Under such circumstances and during the period of such
investment, the Fund may not achieve its stated investment objective.
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.
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<PAGE> 64
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.
SHAREHOLDER VOTE
----------------
As used in this Statement of Additional Information, a "vote
of the holders of a majority of the outstanding shares" of the Trust or a
particular investment fund means, with respect to the approval of an investment
advisory agreement, a distribution plan or a change in a fundamental investment
policy, the affirmative vote of the lesser of (a) 50% or more of the outstanding
shares of the Trust or such fund or (b) 67% or more of the shares of the Trust
or such fund present at a meeting if more than 50% of the outstanding shares of
the Trust or such fund are represented at the meeting in person or by proxy.
ADDITIONAL INFORMATION ABOUT PORTFOLIO INSTRUMENTS
--------------------------------------------------
ELIGIBLE SECURITIES
-------------------
The Money Market Funds may purchase "eligible securities" that
present minimal credit risks as determined by the Adviser pursuant to guidelines
established by the Trust's Board of Trustees. Eligible securities generally
include: (1) securities that are rated by two or more Rating Agencies (or the
only Rating Agency which has issued a rating) in one of the two highest rating
categories for short term debt securities; (2) securities that have no short
term rating, if the issuer has other outstanding short term obligations that are
comparable in priority and security as determined by the Adviser ("Comparable
Obligations") and that have been rated in accordance with (1) above; (3)
securities that have no short term rating, but are determined to be of
comparable quality to a security satisfying (1) or (2) above, and the issuer
does not have Comparable Obligations rated by a Rating Agency; and (4)
securities with credit supports that meet specified rating criteria similar to
the foregoing and other criteria in accordance with applicable Securities and
Exchange Commission ("SEC") regulations. Securities issued by a money market
fund and securities issued by the U.S. Government may constitute eligible
securities if permitted under applicable SEC regulations and Trust procedures.
The Board of Trustees will approve or ratify any purchases by the Money Market
Funds of securities that are rated by only one Rating Agency or that qualify
under (3) above as long as required by applicable regulations or Trust
procedures.
VARIABLE AND FLOATING RATE INSTRUMENTS
--------------------------------------
Each Fund (other than the Equity Index, Treasury Money Market
and Treasury Plus Money Market Funds) may purchase variable and floating rate
obligations (including variable amount master demand notes) which are unsecured
instruments that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rate. Because variable and floating rate
obligations are direct lending arrangements between the Fund and the issuer,
they are not normally traded although certain variable and floating rate
obligations, such as Student Loan
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<PAGE> 65
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. 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 Limited Maturity Bond
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 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
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<PAGE> 66
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
Money Market 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, Limited Maturity Bond, 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 generally equals the price paid
by the Fund plus interest negotiated on the basis of
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<PAGE> 67
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 and 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 and Money Market Funds enter into a reverse
repurchase agreement as described in the Prospectuses, it will place in a
segregated custodial account liquid assets at least equal to the repurchase
price marked to market
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<PAGE> 68
daily (including accrued interest) and will subsequently monitor the account to
ensure such equivalent value is maintained. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Fund may
decline below the price at which it is obligated to repurchase the securities.
Reverse repurchase agreements are considered to be borrowings by the Fund under
the 1940 Act.
LENDING OF PORTFOLIO SECURITIES
-------------------------------
The International Equity, Small Cap Value, Small Cap Growth,
Equity Growth, Tax Managed Equity, Core Equity, Equity Index, Equity Income,
Balanced Allocation, Total Return Advantage, Bond, Intermediate Bond, GNMA,
Limited Maturity Bond, 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.
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<PAGE> 69
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, Limited Maturity Bond,
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 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, Limited
Maturity Bond 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
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<PAGE> 70
"American, European and Global Depository Receipts" below). Such securities may
or may not be listed on foreign or domestic stock exchanges.
Investments in foreign securities involve certain inherent
risks, such as political or economic instability of the issuer or the country of
issue, the difficulty of predicting international trade patterns, changes in
exchange rates of foreign currencies and the possibility of adverse changes in
investment or exchange control regulations. There may be less publicly available
information about a foreign company than about a domestic company. Foreign
companies generally are not subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to domestic
companies. Further, foreign stock markets are generally not as developed or
efficient as those in the U.S., and in most foreign markets, volume and
liquidity are less than in the U.S. Fixed commissions on foreign stock exchanges
are generally higher than the negotiated commissions on U.S. exchanges, and
there is generally less government supervision and regulation of foreign stock
exchanges, brokers and companies than in the U.S.
With respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets, or diplomatic developments that could affect
investment within those countries. Because of these and other factors,
securities of foreign companies acquired by the Fund may be subject to greater
fluctuation in price than securities of domestic companies.
Since the Funds will invest substantially in securities
denominated in or quoted in currencies other than the U.S. dollar, changes in
currency exchange rates (as well as changes in market values) will affect the
value in U.S. dollars of securities held by the Fund. Foreign exchange rates are
influenced by trade and investment flows, policy decisions of governments, and
investor sentiment about these and other issues. In addition, costs are incurred
in connection with conversions between various currencies.
The conversion of the eleven member states of the European
Union to a common currency, the "euro," is scheduled to occur on January 1,
1999. As a result of the conversion, securities issued by the member states will
be subject to certain risks, including competitive implications of increased
price transparency of European Union markets (including labor markets) resulting
from adoption of a common currency and issuers' plans for pricing their own
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
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<PAGE> 71
beyond; whether the interest rate, tax and labor regimes of participating
European countries will converge over time; and whether the conversion of the
currencies of other EU countries such as the United Kingdom, Denmark and Greece
into the euro and the possible admission of other non-EU countries such as
Poland, Latvia and Lithuania as members of the EU may have an impact on the
euro.
These or other factors, including political and economic
risks, could cause market disruptions before or after the introduction of the
euro, and could adversely affect the value of securities and foreign currencies
held by the Funds. Commissions on transactions in foreign securities may be
higher than those for similar transactions on domestic stock markets. In
addition, clearance and settlement procedures may be different in foreign
countries and, in certain markets, such procedures have been unable to keep pace
with the volume of securities transactions, thus making it difficult to conduct
such transactions.
The expense ratio of a Fund can be expected to be higher than
that of funds investing in domestic securities. The costs of investing abroad
are generally higher for several reasons, including the cost of investment
research, increased costs of custody for foreign securities, higher commissions
paid for comparable transactions involving foreign securities, and costs arising
from delays in settlements of transactions involving foreign securities.
Interest and dividends payable on the Fund's foreign portfolio
securities may be subject to foreign withholding taxes. To the extent such taxes
are not offset by tax credits or deductions allowed to investors under U.S.
federal income tax provisions, they may reduce the return to the Fund's
shareholders.
The Funds may invest in ADRs. Some of the Funds may also
invest in SPDRs, EDRs, GDRs and other similar global instruments. The Mid Cap
Growth Fund may also invest in MidCap SPDRs
ADRs are receipts issued in registered form by a U.S. bank or trust company
evidencing ownership of underlying securities issued by a foreign issuer. ADRs
may be listed on a national securities exchange or may be traded in the
over-the-counter markets. ADR prices are denominated in U.S. dollars although
the underlying securities may be denominated in a foreign currency. SPDRs are
receipts designed to replicate the performance of the S&P 500. MidCap SPDRs
represent ownership in the MidCap SPDR Trust, a unit investment trust which
holds a portfolio of common stocks that closely tracks the price performance and
dividend yield of the S&P 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.
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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, Limited Maturity Bond, Mid Cap Growth and U.S. Government
Income Funds are authorized to enter into forward currency exchange contracts.
These contracts involve an obligation to purchase or sell a specified currency
at a future date at a price set at the time of the contract. Forward currency
contracts do not eliminate fluctuations in the values of portfolio securities
but rather allow the Funds to establish a rate of exchange for a future point in
time.
When entering into a contract for the purchase or sale of a
security, these Funds may enter into a forward foreign currency exchange
contract for the amount of the purchase or sale price to protect against
variations, between the date the security is purchased or sold and the date on
which payment is made or received, in the value of the foreign currency relative
to the U.S. dollar or other foreign currency.
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 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
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<PAGE> 73
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 Limited Maturity Bond 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 Limited Maturity Bond Funds may invest in debt
securities for which the principal due at maturity, while paid in U.S. dollars,
is determined by reference to the exchange rate between the U.S. dollar and the
currency of one or more foreign countries ("Exchange Rate-Related Securities").
The interest payable on these securities is also denominated in U.S. dollars and
is not subject to foreign currency risk and, in most cases, is paid at rates
higher than most other similarly rated securities in recognition of the risks
associated with these securities. There is the possibility of significant
changes in rates of exchange between the U.S. dollar and any foreign currency to
which an Exchange Rate-Related Security is linked. In addition, there is no
assurance that sufficient trading interest to create a liquid secondary market
will exist for a particular Exchange Rate-Related Security due to conditions in
the debt and foreign currency markets. Illiquidity in the forward foreign
exchange market and the high volatility of the foreign 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
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<PAGE> 74
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, Limited Maturity Bond, 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 Limited Maturity Bond Funds may also invest in debt securities which
may include: equipment lease and trust certificates; collateralized mortgage
obligations; state, municipal and private activity bonds; obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities; securities
of supranational organizations such as the World Bank; participation
certificates in pools of mortgages, including mortgages issued or guaranteed by
the U.S. government, its agencies or instrumentalities; asset-backed securities
such as mortgage backed securities, 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 Limited Maturity Bond 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
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<PAGE> 75
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 Limited Maturity Bond 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.
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,
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<PAGE> 76
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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<PAGE> 77
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 Limited Maturity Bond 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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<PAGE> 78
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, Limited Maturity Bond, 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, Limited Maturity Bond, 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
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<PAGE> 79
option contract. A put option for a particular security gives the purchaser the
right to sell the underlying security at the stated exercise price at any time
prior to the expiration date of the option, regardless of the market price of
the security. In contrast to an option on a particular security, an option on a
securities index provides the holder with the right to make or receive a cash
settlement upon exercise of the option.
Each Fund may purchase and sell put options on portfolio
securities at or about the same time that it purchases the underlying security
or at a later time. By buying a put, a Fund limits its risk of loss from a
decline in the market value of the security until the put expires. Any
appreciation in the value of and yield otherwise available from the underlying
security, however, will be partially offset by the amount of the premium paid
for the put option and any related transaction costs. Call options may be
purchased by a Fund in order to acquire the underlying security at a later date
at a price that avoids any additional cost that would result from an increase in
the market value of the security. A Fund may also purchase call options to
increase its return to investors at a time when the call is expected to increase
in value due to anticipated appreciation of the underlying security. Prior to
its expiration, a purchased put or call option may be sold in a closing sale
transaction (a sale by a Fund, prior to the exercise of an option that it has
purchased, of an option of the same series), and profit or loss from the sale
will depend on whether the amount received is more or less than the premium paid
for the option plus the related transaction costs.
In addition, each Fund may write covered call and secured put
options. A covered call option means that a Fund owns or has the right to
acquire the underlying security subject to call at all times during the option
period. A secured put option means that a Fund maintains in a segregated account
with its custodian cash or U.S. government securities in an amount not less than
the exercise price of the option at all times during the option period. Such
options will be 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
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<PAGE> 80
Statement of Additional Information.
Risk Factors Associated with Futures and Related Options
To the extent the Total Return Advantage, Bond, GNMA and
Limited Maturity Bond 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 Limited
Maturity Bond Funds intend to enter into futures contracts and the Total Return
Advantage and Limited Maturity Bond 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, Limited Maturity Bond 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
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other liquid, high grade debt securities consistent with the Fund's investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained.
SHORT SALES
-----------
The Tax Managed Equity, Balanced Allocation, GNMA, Mid Cap
Growth, U.S. Government Income and Michigan 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 Prospectuses, 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.
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<PAGE> 84
GNMA certificates consist of underlying mortgages with a maximum maturity of 30
years. However, due to scheduled and unscheduled principal payments, GNMA
certificates have a shorter average maturity and, therefore, less principal
volatility than a comparable 30-year bond. Since prepayment rates vary widely,
it is not possible to predict accurately the average maturity of a particular
GNMA pool. GNMA securities differ from conventional bonds in that principal is
paid back to the certificate holders over the life of the loan rather than at
maturity. The scheduled monthly interest and principal payments relating to
mortgages in the pool are "passed through" to investors. In addition, there may
be unscheduled principal payments representing prepayments on the underlying
mortgages. Although GNMA certificates may offer yields higher than those
available from other types of U.S. Government securities, GNMA certificates may
be less effective than other types of securities as a means of "locking in"
attractive long-term rates because of the prepayment feature. For instance, when
interest rates decline, the value of a GNMA certificate likely will not rise as
much as comparable debt securities due to the prepayment feature. In addition,
these prepayments can cause the price of a GNMA certificate originally purchased
at a premium to decline in price to its par value, which may result in a loss.
There are a number of important differences among the agencies
and instrumentalities of the U.S. Government that issue mortgage-related
securities and among the securities that they issue. Mortgage-related securities
guaranteed by the GNMA include GNMA Mortgage Pass-Through Certificates (also
known as Ginnie Maes) which are guaranteed as to the timely payment of principal
and interest by GNMA and such guarantee is backed by the full faith 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,
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<PAGE> 85
many of which have given debtors the right to set off certain amounts owed on
the credit cards, thereby reducing the balance due. Most issuers of automobile
receivables permit the servicers to retain possession of the underlying
obligations. If the servicer were to sell these obligations to another party,
there is a risk that the purchaser would acquire an interest superior to that of
the holders of the related automobile receivables. In addition, because of the
large number of vehicles involved in a typical issuance and technical
requirements under state laws, the trustee for the holders of the automobile
receivables may not have an effective security interest in all of the
obligations backing such receivables. Therefore, there is a possibility that
recoveries on repossessed collateral may not, in some cases, be able to support
payments on these securities.
INTEREST RATE AND TOTAL RETURN SWAPS
------------------------------------
The Balanced Allocation, Total Return Advantage, GNMA, Limited
Maturity Bond 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. The 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 Limited Maturity
Bond 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
Limited Maturity Bond 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.
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<PAGE> 86
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 Bond, U.S. Government Income and Michigan
Municipal Bond Funds may invest in zero coupon obligations. Zero coupon
obligations are discount debt obligations that do not make periodic interest
payments although income is generally imputed to the holder on a current basis.
Such obligations may have higher price volatility than those which require the
payment of interest periodically. The Adviser will consider the liquidity needs
of the Fund when any investment in zero coupon obligations is made.
INCOME PARTICIPATION LOANS
--------------------------
The Balanced Allocation, Total Return Advantage, Intermediate
Bond, and Limited Maturity Bond 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
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<PAGE> 87
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.
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, Limited
Maturity Bond, 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.
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<PAGE> 88
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.
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,
Limited Maturity Bond, 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 Limited
Maturity Bond 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
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<PAGE> 89
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
Limited Maturity Bond 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.
The Balanced Allocation, Total Return Advantage, Intermediate
Bond and Limited Maturity Bond 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%.
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<PAGE> 90
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 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 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 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
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<PAGE> 91
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, Limited Maturity Bond, Ohio Municipal
Money Market, Pennsylvania Tax Exempt Money Market, Tax Exempt Money Market,
Money Market, Government Money Market, Mid Cap Growth, U.S. Government Income,
and Michigan Municipal Bond Funds include, in addition to Treasury Bills, the
obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land
Banks, the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration,
Government National Mortgage Association, General Services Administration,
Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home
Loan Mortgage Corporation, Federal Intermediate Credit Banks and Maritime
Administration. Some of these obligations are supported by the full faith and
credit of the U.S. Treasury, such as obligations issued by the Government
National Mortgage Association. Others, such as those of the Export-Import Bank
of the United States, are supported by the right of the issuer to borrow from
the U.S. Treasury; others, such as those of the Federal National Mortgage
Association, are supported by the discretionary authority of the U.S. Government
to purchase the agency's obligations; and still others, such as those of the
Student Loan Marketing Association, are supported only by the credit of the
agency or instrumentality issuing the obligation. No assurance can be given that
the U.S. Government would provide financial support to U.S. Government-sponsored
agencies or instrumentalities if it is not obligated to do so by law. Some of
these investments may be variable or floating rate instruments. See "Variable
and Floating Rate Obligations." The Ohio Municipal Money Market, Pennsylvania
Tax Exempt Money Market, Tax Exempt Money Market, Money Market and Government
Money Market Funds will invest in the obligations of such agencies or
instrumentalities only when the Adviser believes that their credit risk with
respect thereto is minimal.
U.S. TREASURY OBLIGATIONS AND RECEIPTS
--------------------------------------
The Balanced Allocation, Total Return Advantage, Bond,
Intermediate Bond, GNMA, Limited Maturity Bond, 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
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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.
STAND-BY COMMITMENTS
--------------------
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,
Limited Maturity Bond, 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;
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pricing risk that the value of a derivative instrument (such as an option) will
not correlate exactly to the value of the underlying securities, rates or
indices on which it is based; extension risk that the expected duration of an
instrument may increase or decrease; and operations risk that loss will occur as
a result of inadequate systems and controls, human error or otherwise. Some
derivative instruments are more complex than others, and for those instruments
that have been developed recently, data are lacking regarding their actual
performance over complete market cycles.
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 Funds 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 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
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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.
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. 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.
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"
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issues. 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.
Municipal Securities that are payable only from the revenues
derived from a particular facility may be adversely affected by federal or state
laws, regulations or court decisions which make it more difficult for the
particular facility to generate revenues sufficient to pay such interest and
principal, including, among others, laws, decisions and regulations which limit
the amount of fees, rates or other charges which may be imposed for use of the
facility or which increase competition among facilities of that type or which
limit or otherwise have the effect of reducing the use of such facilities
generally, thereby reducing the revenues generated by the particular facility.
Municipal Securities, the payment of interest and principal on which is insured
in whole or in part by a governmentally created fund, may be adversely affected
by laws or regulations which restrict the aggregate proceeds available for
payment of principal and interest in the event of a default on such municipal
securities. Similarly, the payment of interest and principal on Municipal
Securities may be adversely affected by respective state laws which limit the
availability of remedies or the scope of remedies available in the event of a
default on such municipal securities. Because of the diverse nature of such laws
and regulations and the impossibility of either predicting in which specific
Municipal Securities the Funds will invest from time to time or predicting the
nature or extent of future judicial interpretations or changes in existing laws
or regulations or the future enactment or adoption of additional laws or
regulations, it is not presently possible to determine the impact of such laws,
regulations and judicial interpretations on the securities in which the Funds
may invest and, therefore, on the shares of the Fund.
There are, of course, variations in the quality of Municipal
Securities both within a particular classification and between classifications,
and the yields on Municipal Securities depend upon a variety of factors,
including the financial condition of the issuer, the general conditions of the
municipal bond market, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The ratings of rating agencies represent
their opinions as to the quality of Municipal Securities. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality, and Municipal Securities with the same maturity, interest rate and
rating may have different yields while Municipal Securities of the same maturity
and interest rate with different ratings may have the same yield. Subsequent to
its purchase by a Fund, an issue of Municipal Securities may cease to be rated
or its rating may be reduced below the minimum rating required for purchase by
the Funds. The Funds' adviser will consider such an event in determining whether
they should continue to hold the obligation.
The payment of principal and interest on most Municipal
Securities purchased by the Funds will depend upon the ability of the issuers to
meet their obligations. An issuer's obligations under its Municipal Securities
are subject to the provisions of bankruptcy, insolvency and other laws affecting
the rights and remedies of creditors, such as the Federal Bankruptcy Code, and
laws, if any, which may be enacted by federal or state legislatures extending
the time for payment of principal or interest, or both, or imposing other
constraints upon enforcement of such obligations or upon the ability of
municipalities to levy taxes. The power or ability of an issuer to
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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 in one of the four highest rating categories by an NRSRO for
bonds and in one of the two highest rating categories by an NRSRO for money
market securities.
Securities that are unrated at the time of purchase will be
determined to be of comparable quality by the Funds' adviser pursuant to
guidelines approved by the Trust's Board of Trustees. If the rating of an
obligation held by a Fund is reduced below its rating requirements, the Fund
will sell the obligation when the adviser believes that it is in the best
interests of the Fund to do so. The applicable ratings are more fully described
in the Appendix.
Special Considerations Regarding Investment in Ohio Municipal Securities
As described in the Prospectus, the Ohio Tax Exempt Bond Fund
and the Ohio Municipal Money Market 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.
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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.
While diversifying more into the service and other
non-manufacturing areas, the Ohio economy continues to rely in part on durable
goods manufacturing largely concentrated in motor vehicles and equipment, steel,
rubber products and household appliances. As a result, general economic
activity, as in many other industrially-developed states, tends to be more
cyclical than in some other states and in the nation as a whole. Agriculture is
an important segment of the economy, with over half the State's area devoted to
farming and approximately 16% of total employment in agribusiness.
In prior years, the State's overall unemployment rate was
commonly somewhat higher than the national figure. For example, the reported
1990 average monthly State rate was 5.7%, compared to the 5.5% national figure.
However, in recent years the State rates were below the national rates (4.3%
versus 4.5% in 1998). The unemployment rate and its effects vary among
geographic areas of the State.
There can be no assurance that future national, regional or
state-wide economic difficulties, and the resulting impact on State or local
government finances generally, will not adversely affect the market value of
Ohio Obligations held in the Ohio Tax Exempt Bond Fund or the ability of
particular obligors to make timely payments of debt service on (or lease
payments relating to) those Obligations.
The State operates on the basis of a fiscal biennium for its
appropriations and expenditures, and is precluded by law from ending its July 1
to June 30 fiscal year (FY) or fiscal biennium in a deficit position. Most State
operations are financed through the General Revenue Fund (GRF), for which the
personal income and sales-use taxes are the major sources. Growth and depletion
of GRF ending fund balances show a consistent pattern related to national
economic conditions, with the ending FY balance reduced during less favorable
and increased during more favorable economic periods. The State has
well-established procedures for, and has timely taken, necessary actions to
ensure resource/expenditure balances during less favorable economic periods.
Those procedures included general and selected reductions in appropriations
spending.
The 1992-93 biennium presented significant challenges to State
finances, successfully addressed. To allow time to resolve certain budget
differences an interim appropriations act was enacted effective July 1, 1991; it
included GRF debt service and lease rental appropriations for the entire
biennium, while continuing most other appropriations for a month.
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Pursuant to the general appropriations act for the entire biennium, passed on
July 11, 1991, $200 million was transferred from the Budget Stabilization Fund
(BSF, a cash and budgetary management fund) to the GRF in FY 1992.
Based on updated results and forecasts in the course of that
FY, both in light of a continuing uncertain nationwide economic situation, there
was projected, and then timely addressed, an FY 1992 imbalance in GRF resources
and expenditures. In response, the Governor ordered most State agencies to
reduce GRF spending in the last six months of FY 1992 by a total of
approximately $184 million; the $100.4 million BSF balance and additional
amounts from certain other funds were transferred late in the FY to the GRF, and
adjustments were made in the timing of certain tax payments.
A significant GRF shortfall (approximately $520 million) was
then projected for FY 1993. It was addressed by appropriate legislative and
administrative actions, including the Governor's ordering $300 million in
selected GRF spending reductions and subsequent executive and legislative action
(a combination of tax revisions and additional spending reductions). The June
30, 1993 ending GRF fund balance was approximately $111 million, of which, as a
first step to replenishment, $21 million was deposited in the BSF.
None of the spending reductions were applied to appropriations
needed for debt service on or lease rentals relating to any State obligations.
The 1994-95 biennium presented a more affirmative financial
picture. Based on June 30, 1994 balances, an additional $260 million was
deposited in the BSF. The biennium ended June 30, 1995 with a GRF ending fund
balance of $928 million, of which $535.2 million was transferred into the BSF.
The significant GRF fund balance, after leaving in the GRF an unreserved and
undesignated balance of $70 million, was transferred to the BSF and other funds
including school assistance funds and, in anticipation of possible federal
program changes, a human services stabilization fund.
From a higher than forecast 1996-97 mid-biennium GRF fund
balance, $100 million was transferred for elementary and secondary school
computer network purposes and $30 million to a new State transportation
infrastructure fund. Approximately $400.8 million served as a basis for
temporary 1996 personal income tax reductions aggregating that amount. The
1996-97 biennium-ending GRF fund balance was $834.9 million. Of that, $250
million went to school building construction and renovation, $94 million to the
school computer network, $44.2 million for school textbooks and instructional
materials and a distance learning program, and $34 million to the BSF and the
$263 million balance to a State income tax reduction fund.
The GRF appropriations act for the 1998-99 biennium was passed
on June 25, 1997 and promptly signed (after selective vetoes) by the Governor.
All necessary GRF appropriations for State debt service and lease rental
payments then projected for the biennium were included in that act (and are
included in the pending House and Senate-passed appropriation bills for FY
2000-01). Subsequent legislation increased the FY 1999 GRF appropriation level
for elementary and secondary education, with the increase funded in part by
mandated small percentage reductions in
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State appropriations for various State agencies and institutions. Expressly
exempt from those reductions are all appropriations for debt service, including
lease rental payments.
The BSF had a June 8, 1999 balance of more than $906 million.
The State's incurrence or assumption of debt without a vote of
the people is, with limited exceptions, prohibited by current State
constitutional provisions. The State may incur debt, limited in amount to
$750,000, to cover casual deficits or failures in revenues or to meet expenses
not otherwise provided for. The Constitution expressly precludes the State from
assuming the debts of any local government or corporation. (An exception is made
in both cases for any debt incurred to repel invasion, suppress insurrection or
defend the State in war.)
By 15 constitutional amendments approved from 1921 to date
(the latest adopted in 1995) Ohio voters authorized the incurrence of State debt
and the pledge of taxes or excises to its payment. At June 8, 1999, almost $1.14
billion (excluding certain highway bonds payable primarily from highway use
receipts) of this debt was outstanding or awaiting delivery. The only such State
debt at that date still authorized to be incurred were portions of the highway
bonds, and the following: (a) up to $100 million of obligations for coal
research and development may be outstanding at any one time ($23.9 million
outstanding); (b) $240 million of obligations previously authorized for local
infrastructure improvements, no more than $120 million of which may be issued in
any calendar year (over $1 billion outstanding) and (c) up to $200 million in
general obligation bonds for parks, recreation and natural resources purposes
which may be outstanding at any one time ($112.7 million outstanding or awaiting
delivery, with no more than $50 million to be issued in any one year).
The electors in 1995 approved a constitutional amendment
extending the local infrastructure bond program (authorizing an additional $1.2
billion of State full faith and credit obligations to be issued over 10 years
for the purpose), and authorizing additional highway bonds (expected to be
payable primarily from highway use receipts). The latter supersedes the prior
$500 million outstanding authorization, and authorizes not more than $1.2
billion to be outstanding at any time and not more than $220 million to be
issued in a fiscal year.
The Constitution also authorizes the issuance of State
obligations for certain purposes, the owners of which do not have the right to
have excises or taxes levied to pay debt service. Those special obligations
include obligations issued by the Ohio Public Facilities Commission and the Ohio
Building Authority, and certain obligations issued by the State Treasurer, over
$5.2 billion of which were outstanding at June 8, 1999.
The General Assembly has placed on the November 1999 general
election ballot a proposed constitutional amendment relating to State debt. If
approved by the voters, it will authorize State general obligation debt to pay
costs of facilities for a system of common schools throughout the State and
facilities for state supported and assisted institutions of higher education.
That, and other debt represented by direct obligations of the State (such as
that authorized by the Ohio Public Facilities Commission and Ohio Building
Authority, and some authorized by the Treasurer), may not be issued if future FY
total debt service on those direct obligations to be paid
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from the GRF or net lottery proceeds exceeds 5% of total estimated revenues of
the State for the GRF and from net State lottery proceeds during the FY of
issuance.
Aggregate FY 1998 rental payments under various capital lease
and lease purchase agreements were approximately $9.1 million. In recent years,
State agencies have also participated in transportation and office building
projects that may have some local as well as State use and benefit, in
connection with which the State enters into lease purchase agreements with terms
ranging from 7 to 20 years. Certificates of participation, or special obligation
bonds of the State or a local agency, are issued that represent fractionalized
interests in or are payable from the State's anticipated payments. The State
estimates highest future FY payments under those agreements (as of June 8, 1999)
to be approximately $25.8 million (of which $22 million is payable from sources
other than the GRF, such as federal highway money distributions). State payments
under all those agreements are subject to biennial appropriations, with the
lease terms being two years subject to renewal if appropriations are made.
A 1990 constitutional amendment authorizes greater State and
political subdivision participation (including financing) in the provision of
housing. The General Assembly may for that purpose authorize the issuance of
State obligations secured by a pledge of all or such portion as it authorizes of
State revenues or receipts (but not by a pledge of the State's full faith and
credit).
A 1994 constitutional amendment pledges the full faith and
credit and taxing power of the State to meeting certain guarantees under the
State's tuition credit program which provides for purchase of tuition credits,
for the benefit of State residents, guaranteed to cover a specified amount when
applied to the cost of higher education tuition. (A 1965 constitutional
provision that authorized student loan guarantees payable from available State
moneys has never been implemented, apart from a "guarantee fund" approach funded
essentially from program revenues.)
State and local agencies issue obligations that are payable
from revenues from or relating to certain facilities (but not from taxes). By
judicial interpretation, these obligations are not "debt" within constitutional
provisions. In general, payment obligations under lease-purchase agreements of
Ohio public agencies (in which certificates of participation may be issued) are
limited in duration to the agency's fiscal period, and are renewable only upon
appropriations being made available for the subsequent fiscal period.
Local school districts in Ohio receive a major portion
(state-wide aggregate approximately 46% in recent years) of their operating
moneys from State subsidies, but are dependent on local property taxes, and in
123 districts (as of June 8, 1999) from voter-authorized income taxes, for
significant portions of their budgets. Litigation, similar to that in other
states, has been pending questioning the constitutionality of Ohio's system of
school funding. The Ohio Supreme Court has concluded that aspects of the system
(including basic operating assistance and the loan program referred to below)
are unconstitutional, and ordered the State to provide for and fund a system
complying with the Ohio Constitution, staying its order to permit time for
responsive corrective actions. After a further hearing, the trial court has
decided that steps taken to date by the State to enhance school funding have not
met the requirements of the Supreme Court decision; the State has filed a notice
of appeal with the Supreme Court, and that Court has issued a stay, pending
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appeal, of the implementation of the trial court's order. A small number of the
State's 612 local school districts have in any year required special assistance
to avoid year-end deficits. A program has provided for school district cash need
borrowing directly from commercial lenders, with diversion of State subsidy
distributions to repayment if needed. Recent borrowings under this program
totaled $71.1 million for 29 districts in FY 1995 (including $29.5 million for
one), $87.2 million for 20 districts in FY 1996 (including $42.1 million for
one), $113.2 million for 12 districts in FY 1997 (including $90 million to one
for restructuring its prior loans), and $23.4 million for 10 districts in FY
1998.
Ohio's 943 incorporated cities and villages rely primarily on
property and municipal income taxes for their operations. With other
subdivisions, they also receive local government support and property tax relief
moneys distributed by the State.
For those few municipalities and school districts that on
occasion have faced significant financial problems, there are statutory
procedures for a joint State/local commission to monitor the fiscal affairs and
for development of a financial plan to eliminate deficits and cure any defaults.
(Similar procedures have recently been extended to counties and townships.)
Since inception for municipalities in 1979, these "fiscal emergency" procedures
have been applied to 26 cities and villages; for 20 of them the fiscal situation
was resolved and the procedures terminated (one city is in preliminary "fiscal
watch" status). As of June 8, 1999, a school district "fiscal emergency"
provision was applied to nine districts, and ten were on preliminary "fiscal
watch" status.
At present the State itself does not levy ad valorem taxes on
real or tangible personal property. Those taxes are levied by political
subdivisions and other local taxing districts. The Constitution has since 1934
limited to 1% of true value in money the amount of the aggregate levy (including
a levy for unvoted general obligations) of property taxes by all overlapping
subdivisions, without a vote of the electors or a municipal charter provision,
and statutes limit the amount of that aggregate levy to 10 mills per $1 of
assessed valuation (commonly referred to as the "ten-mill limitation"). Voted
general obligations of subdivisions are payable from property taxes that are
unlimited as to amount or rate.
Special Risk Considerations Regarding Investment in Pennsylvania Securities
Potential shareholders should consider the fact that the
Pennsylvania Municipal Bond Fund's portfolio consists primarily of securities
issued by the Commonwealth of Pennsylvania (the "Commonwealth"), its
municipalities and authorities and should realize that the Fund's performance is
closely tied to general economic conditions within the Commonwealth as a whole
and to economic conditions within particular industries and geographic areas
located within the Commonwealth.
Although the General Fund of the Commonwealth (the principal
operating fund of the Commonwealth) experienced deficits in fiscal 1990 and
1991, tax increases and spending decreases have resulted in surpluses the last
six years; as of June 30, 1998, the General Fund had a surplus of $1,364.9
million.
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Pennsylvania's economy historically has been dependent upon
heavy industry, but has diversified recently into various services, particularly
into medical and health services, education and financial services. Agricultural
industries continue to be an important part of the economy, including not only
the production of diversified food and livestock products, but substantial
economic activity in agribusiness and food-related industries. Service
industries currently employ the greatest share of non-agricultural workers,
followed by the categories of trade and manufacturing. Future economic
difficulties in any of these industries could have an adverse impact on the
finances of the Commonwealth or its municipalities, and could adversely affect
the market value of the Bonds in the Pennsylvania Trust or the ability of the
respective obligors to make payments of interest and principal due on such
Bonds.
Certain litigation is pending against the Commonwealth that
could adversely affect the ability of the Commonwealth to pay debt service on
its obligations including as of June 1, 1999, suits relating to the following
matters: (i) In February 1999, a taxpayer filed a petition for review in the
Commonwealth Court of Pennsylvania asking the court to declare that Chapter 5
(relating to Sports Facilities Financing) of the Capital Facilities Debt
Enabling Act is in violation of the Pennsylvania Constitution. Commonwealth
Court denied the taxpayer's motion for a preliminary injunction and the Supreme
Court denied an appeal of such denial. The respondents have filed preliminary
objections in the nature of a demurrer, requesting the Court dismiss the case
with prejudice. Oral arguments before the Commonwealth Court regarding the
preliminary objections were scheduled for May 19, 1999, (ii) The American Civil
Liberties Union ("ACLU") filed suit in federal court demanding additional
funding for child welfare services; the Commonwealth settled a similar suit in
the Commonwealth Court of Pennsylvania and is seeking the dismissal of the
federal suit, among other things, because of that settlement. After its earlier
denial of class certification was reversed by the Third Circuit Court of
Appeals, the district court granted class certification to the ACLU, and the
parties are proceeding with discovery. In July 1998, a settlement agreement was
reached with the City of Philadelphia. The Commonwealth has agreed to pay
$100,000 to settle plaintiffs' $1.4 million claim for attorney's fees and to
take other actions in exchange for a full and final release and dismissal of the
case against the Commonwealth parties. The settlement was approved by the
district court on February 1, 1999, and the case was dismissed; (iii) In 1987,
the Supreme Court of Pennsylvania held the statutory scheme for county funding
of the judicial system to be in conflict with the constitution of the
Commonwealth, but it stayed judgment pending enactment by the legislature of
funding consistent with the opinion, and the legislature has yet to consider
legislation implementing the judgment. In 1992, a new action in mandamus was
filed seeking to compel the Commonwealth to comply with the original decision.
The Court issued a writ in mandamus and appointed a special master in 1996 to
submit a plan for implementation, which it intended to require by January 1,
1998. In January 1997, the Court established a committee, consisting of the
special master and representatives of the Executive and Legislative branches, to
develop an implementation plan; an implementation plan was filed in July 1997.
In April 1998 the General Assembly appropriated approximately $12 million for
the funding of county court administrator, under the implementation plan.
However, no legislation has been approved for the payment of Commonwealth
compensation county court administrators. In May 1998, an action was filed by
the Administrative Governing Board of the First Judicial District claiming the
city government has failed to provide adequate Funds for the Operation of the
courts of the First
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Judicial District. In November 1998, the First Judicial District Governing Board
filed with the Supreme Court a renewed motion for entry of an order providing
emergency relief, which requests the City of Philadelphia to provide funds to
the First Judicial District Courts, in order to maintain necessary judicial
operations throughout the end of the fiscal year. Although the Supreme Court
issued no order, the City is apparently continuing its funding of the courts;
(iv) Litigation was filed in both state and federal court by an association of
rural and small schools and several individual school districts and parents
challenging the constitutionality of the Commonwealth's system for funding local
school districts -- the federal case has been stayed pending the resolution of
the state case; a trial in the state case commenced in January 1997 and has
recessed; no briefing schedule or date for oral argument has yet been set; On
July 9, 1998 the state court issued an opinion dismissing the petitioners' claim
in its entirety. On July 20, 1998 the petitioner filed a timely motion for
post-trial relief, taking exception to the state court's findings of fact and
conclusions of law. The Supreme Court, after assuming jurisdiction in the case
directed that all parties submit briefs on all issues presented in the
petitioners' motion for post-trial relief; and (v) In 1995, the Commonwealth,
the Governor of Pennsylvania, the City of Philadelphia and the Mayor of
Philadelphia were joined as additional respondents in an enforcement action
commenced in Commonwealth Court in 1973 by the Pennsylvania Human Relations
Commission against the School District of Philadelphia pursuant to the
Pennsylvania Human Relations Act. The Commonwealth and the City were joined to
determine their liability, if any, to pay additional costs necessary to remedy
segregation-related conditions found to exist in Philadelphia public schools. In
January 1997, the Pennsylvania Supreme Court ordered the parties to brief
certain issues. The Supreme Court heard oral argument on the issues in February
1998 but no decision has been issued, (vi) In February 1997, five residents of
the City of Philadelphia, joined by the City, the School District and others,
filed a civil action in the Commonwealth Court for declaratory judgment against
the Commonwealth and certain Commonwealth officers and officials that the
defendants had failed to provide an adequate quality of education in
Philadelphia, as required by the Pennsylvania Constitution. In March 1998, the
Commonwealth Court dismissed the case on the grounds that the issues prescribed
are not justifiable. An appeal to the Supreme Court of Pennsylvania is pending,
(vii) In April 1995, the Commonwealth reached a settlement agreement with
Fidelity Bank and certain other banks with respect to the constitutional
validity of the Amended Bank Shares Act and related legislation; although this
settlement agreement did not require expenditure of Commonwealth funds, the
petitions of other banks are currently pending with the Commonwealth Court; In
January 1998 a panel of the Commonwealth Court ruled in favor of the
Commonwealth, finding no constitutional violation. Royal Bank filed exceptions,
which the Commonwealth Court en banc denied. Royal Bank appealed to the Supreme
Court and briefing has been completed. The Court has not yet scheduled oral
arguments. (viii) Suit has been filed in state court against the State
Employees' Retirement Board claiming that the use of gender district actuarial
factors to compute benefits received before August 1, 1983 violates the
Pennsylvania Constitution (gender-neutral factors have been used since August 1,
1983, the date on which the U.S. Supreme Court held in ARIZONA GOVERNING
COMMITTEE V. NORRIS that the use of such factors violated the Federal
Constitution); in 1996, the Commonwealth Court heard oral argument EN BLANC, and
in 1997 denied the plaintiff's motion for judgement on the pleading. The case is
currently in discovery. (ix) In March 1997, Rite Aid of Pennsylvania, Inc. filed
in the United States District Court for the Eastern District of Pennsylvania, a
civil action against the Secretary of Public Welfare alleging that regulations
promulgated in October 1995 governing payment rates for prescription drugs and
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related services provided to recipients of benefits under the Pennsylvania
Medical Assistance Program violated provisions of Title XIX of the Social
Security Act and regulations of the U.S. Department of Health and Human
Services, as well as provisions of State law and Federal constitutional due
process. In August 1998, the court declared that certain pharmacy reimbursement
rates were in violation of the Medicaid Act and enjoined the Secretary from
using these rates to reimburse for any prescription drugs and related services
provided to Medicaid recipients on and after October 1, 1998. The Secretary
filed motions for appeal and in March 1999, the U.S. Court of Appeals for the
Third Circuit reversed the district court's order and remanded the case for
further proceedings. The plaintiffs on April 5, 1999 filed an application for
rehearing. (x) On March 9, 1998 several residents of the City of Philadelphia
along with the School District of Philadelphia and others brought suit in the
United States District Court for the Eastern District of Pennsylvania against
the Governor, the Secretary of Education and others alleging that the defendants
are violating a regulation of the U.S. Department of Education promulgated under
Title VI of the Civil Rights Act of 1964 in that the Commonwealth's system for
funding public schools has the effect of discrimination on the basis of race. On
November 18, 1998, the district court dismissed the action with prejudice. An
appeal by the plaintiffs was filed and the parties are awaiting the scheduling
of oral argument.
Although there can be no assurance that such conditions will
continue, the Commonwealth's general obligation bonds are currently rated AA by
S&P and A3 and A1 by Moody's and Philadelphia's and Pittsburgh's general
obligation bonds are currently rated BBB and BBB, respectively, by S&P and Baa2
and Baa1, respectively, by Moody's.
The City of Philadelphia (the "City") experienced a series of
General Fund deficits for fiscal years 1988 through 1992 and, while its general
financial situation has improved, the City is still seeking a long-term solution
for its economic difficulties. The audited balance of the City's General Fund as
of June 30, 1998 was a surplus of $169.2 million.
In recent years an authority of the Commonwealth, the
Pennsylvania Intergovernmental Cooperation Authority ("PICA"), has issued
approximately $1.76 billion of special revenue bonds on behalf of the City to
cover budget shortfalls, to eliminate projected deficits and to fund capital
spending. As one of the conditions of issuing bonds on behalf of the City, PICA
exercises oversight of the City's finances. The City is currently operating
under a five year plan approved by PICA in 1996. PICA's power to issue further
bonds to finance capital projects expired on December 31, 1994. PICA's authority
to issue bonds to finance cash flow deficits expired on December 31, 1996, but
its authority to refund existing debt will not expire. PICA had approximately
$1.1 billion in special revenue bonds outstanding as of April 15, 1999.
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SPECIAL CONSIDERATIONS REGARDING INVESTMENT IN MICHIGAN
MUNICIPAL SECURITIES. The following information is drawn from various Michigan
governmental publications, particularly the Governor's Executive Budget for
fiscal year 1999-2000, and from official statements relating to securities
offerings of the State and its political subdivisions. While the Trust has not
independently verified such information, it has no reason to believe that it is
not correct in all material respects.
The State of Michigan's economy is principally dependent on
manufacturing (particularly automobiles, office equipment and other durable
goods), tourism and agriculture, and historically has been highly cyclical.
Total State wage and salary employment is estimated to have
grown by 1.9% in 1998. The rate of unemployment is estimated to have been 3.8%
in 1998, below the national average for the fifth consecutive year. Personal
income grew at an estimated 5.1% annual rate in 1998, up from the 4.6% growth
reported for 1997.
During the past five years, improvements in the Michigan
economy have resulted in increased revenue collections which, together with
restraints on the expenditure side of the budget, have resulted in State General
Fund budget surpluses, most of which were transferred to the State's
Counter-Cyclical Budget and Economic Stabilization Fund. The balance of that
Fund as of September 30, 1998 is estimated to have been in excess of $1.1
billion.
The Michigan Constitution limits the amount of total State
revenues that can be raised from taxes and certain other sources. State revenues
(excluding federal aid and revenues for payment of principal and interest on
general obligation bonds) in any fiscal year are limited to a fixed percentage
of State personal income in the prior calendar year or the average of the prior
three calendar years, whichever is greater, and this fixed percentage equals the
percentage of the 1978-79 fiscal year state government revenues to total
calendar year 1977 State personal income (which was 9.49%).
The Michigan Constitution also provides that the proportion of
State spending paid to all units of local government to total State spending may
not be reduced below the proportion in effect in the 1978-79 fiscal year. The
State originally determined that portion to be 41.6%. If such spending does not
meet the required level in a given year, an additional appropriation for local
governmental units is required by the following fiscal year; which means the
year following the determinations of the shortfall, according to an opinion
issued by the State's Attorney General. Spending for local units met this
requirement for fiscal years 1986-87 through 1991-92. As the result of
litigation, the State agreed to reclassify certain expenditures, beginning with
fiscal year 1992-93, and has recalculated the required percentage of spending
paid to local government units to be 48.97%.
The State has issued and has outstanding general obligation
full faith and credit bonds for Water Resources, Environmental Protection
Program, Recreation Program and School Loan purposes. As of September 30, 1998,
the State had approximately $874 million of general obligation bonds
outstanding.
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The State may issue notes or bonds without voter approval for
the purposes of making loans to school districts. The proceeds of such notes or
bonds are deposited in the School Bond Loan Fund maintained by the State
Treasurer and used to make loans to school districts for payment of debt on
qualified general obligation bonds issued by local school districts.
The State is a party to various legal proceedings seeking
damages or injunctive or other relief. In addition to routine litigation,
certain of these proceedings could, if unfavorably resolved from the point of
view of the State, substantially affect State programs or finances. As of early
1998, these lawsuits involved programs generally in the areas of corrections,
tax collection, commerce, and proceedings involving budgetary reductions to
school districts and governmental units, and court funding. Notable among these
legal proceedings are lawsuits brought by a number of school districts
challenging the constitutionality of certain state-mandated special education
services without corresponding state funding.
The State Constitution limits the extent to which
municipalities or political subdivisions may levy taxes upon real and personal
property through a process that regulates assessments.
On March 15, 1994, Michigan voters approved a property tax and
school finance reform measure commonly known as Proposal A. Under Proposal A, as
approved, effective May 1, 1994, the State sales and use tax increased from 4%
to 6%, the State income tax decreased from 4.6% to 4.4%, the cigarette tax
increased from $.25 to $.75 per pack and an additional tax of 16% of the
wholesale price began to be imposed on certain other tobacco products. A .75%
real estate transfer tax became effective January 1, 1995. Beginning in 1994, a
state property tax of 6 mills began to be imposed on all real and personal
property currently subject to the general property tax. All local school boards
are authorized, with voter approval, to levy up to the lesser of 18 mills or the
number of mills levied in 1993 for school operating purposes on nonhomestead
property and nonqualified agricultural property. Proposal A contains additional
provisions regarding the ability of local school districts to levy taxes, as
well as a limit on assessment increases for each parcel of property, beginning
in 1995. Such increases for each parcel of property are limited to the lesser of
5% or the rate of inflation. When property is subsequently sold, its assessed
value will revert to the current assessment level of 50% of true cash value.
Under Proposal A, much of the additional revenue generated by the new taxes will
be dedicated to the State School Aid Fund.
Proposal A and its implementing legislation shifted
significant portions of the cost of local school operations from local school
districts to the State and raised additional State revenues to fund these
additional State expenses. These additional revenues will be included within the
State's constitutional revenue limitations and may impact the State's ability to
raise additional revenues in the future.
A state economy during a recessionary cycle would also, as a separate
matter, adversely affect the capacity of users of facilities constructed or
acquired through the proceeds of private
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activity bonds or other "revenue" securities to make periodic payments for the
use of those facilities.
OTHER TAX-EXEMPT INSTRUMENTS
----------------------------
Investments by the Ohio Tax Exempt Bond, Pennsylvania
Municipal Bond, National Tax Exempt Bond, Ohio Municipal Money Market,
Pennsylvania Tax Exempt Money Market and Tax Exempt Money Market Funds in
tax-exempt commercial paper will be limited to investments in obligations which
are rated at least A-2 or SP-2 by S&P, F-2 by Fitch or Prime-2, MIG-2 or VMIG-2
by Moody's at the time of investment or which are of equivalent quality as
determined by the Adviser. Investments in floating rate instruments will
normally involve industrial development or revenue bonds which provide that the
investing Fund can demand payment of the obligation at all times or at
stipulated dates on short notice (not to exceed 30 days) at par plus accrued
interest. A Fund must use the shorter of the period required before it is
entitled to prepayment under such obligations or the period remaining until the
next interest rate adjustment date for purposes of determining the maturity.
Such obligations are frequently secured by letters of credit or other credit
support arrangements provided by banks. The quality of the underlying credit or
of the bank, as the case may be, must, in the opinion of the Adviser be
equivalent to the commercial paper ratings stated above. The Adviser will
monitor the earning power, cash flow and liquidity ratios of the issuers of such
instruments and the ability of an issuer of a demand instrument to pay principal
and interest on demand. Other types of tax-exempt instruments may also be
purchased as long as they are of a quality equivalent to the bond or commercial
paper ratings stated above.
PORTFOLIO TURNOVER
------------------
The portfolio turnover rate for each Fund is calculated by
dividing the lesser of purchases or sales of portfolio securities for the year
by the monthly average value of the portfolio securities. The calculation
excludes U.S. Government securities and all securities whose maturities at the
time of acquisition were one year or less. Portfolio turnover may vary greatly
from year to year as well as within a particular year, and may also be affected
by cash requirements for redemptions of shares and by requirements which enable
the Trust to receive certain favorable tax treatment. Portfolio turnover will
not be a limiting factor in making decisions.
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.
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No Fund may:
1. Purchase any securities which would cause 25% or more of
the value of its total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that:
(a) there is no limitation with respect to obligations
issued or guaranteed by the U.S. government, any
state, territory or possession of the United States,
the District of Columbia or any of their authorities,
agencies, instrumentalities or political
subdivisions, and repurchase agreements secured by
such instruments;
(b) wholly-owned finance companies will be considered to
be in the industries of their parents if their
activities are primarily related to financing the
activities of the parents;
(c) utilities will be divided according to their
services, for example, gas, gas transmission,
electric and gas, electric, and telephone will each
be considered a separate industry;
(d) personal credit and business credit businesses will
be considered separate industries.
2. Make loans, except that the Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies and may lend portfolio securities in an amount
not exceeding one-third of its total assets.
3. Borrow money, issue senior securities or mortgage, pledge
or hypothecate its assets except to the extent permitted under the 1940 Act.
4. 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.
5. 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.
6. 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.
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With respect to investment limitation No. 1 above, 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.
With respect to investment limitation No. 1 above, 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, 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.
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3. Purchase securities on margin, make short sales of
securities or maintain a short position, except that, as consistent with a
Fund's investment objective and policies, (a) this investment limitation shall
not apply to the Fund's transactions in futures contracts and related options,
options on securities or indices of securities and similar instruments, and (b)
it may obtain short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities.
4. Purchase securities of companies for the purpose of
exercising control.
5. Invest more than 15% (10% in the case of the Money Market
Funds) of its net assets in illiquid securities.
6. Purchase securities while its outstanding borrowings
(including reverse repurchase agreements) are in excess of 5% of its total
assets. Securities held in escrow or in separate accounts in connection with a
Fund's investment practices described in its Prospectus or Statement of
Additional Information are not deemed to be pledged for purposes of this
limitation.
With respect to each of the Ohio Tax Exempt and Pennsylvania
Municipal 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).
As the 1940 Act, the Funds do not intend to acquire securities
issued by the Adviser, Sub-Adviser, Distributor and their affiliates.
NET ASSET VALUE
---------------
VALUATION OF THE MONEY MARKET FUNDS
-----------------------------------
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
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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.
VALUATION OF THE FIXED INCOME FUNDS AND THE TAX-EXEMPT FUNDS
------------------------------------------------------------
The assets of the Fixed Income Funds and the Tax-Exempt Funds are
valued for purposes of pricing sales and redemptions by an independent pricing
service ("Service") approved by the Board of Trustees. When, in the judgment of
the Service, quoted bid prices for portfolio securities are readily available
and are representative of the bid side of the market, these investments are
valued at the mean between quoted bid prices (as obtained by the Service from
dealers in such securities) and asked prices (as calculated by the Service based
upon its evaluation of the market for such securities). Other investments are
carried at fair value as determined by the Service, based on methods which
include consideration of yields or prices of bonds of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. The Service may also employ electronic data processing
techniques and matrix systems to determine value. Short-term securities are
valued at amortized cost, which approximates market value. The amortized cost
method involves valuing a security at its cost on the date of purchase and
thereafter assuming a constant amortization to maturity of the difference
between the principal amount due at maturity and cost.
VALUATION OF THE BALANCED ALLOCATION FUND AND THE EQUITY FUNDS
--------------------------------------------------------------
In determining market value, the assets in the Balanced Allocation Fund
and the Equity Funds which are traded on a recognized stock exchange are valued
at the last sale price on the securities exchange on which such securities are
primarily traded or at the last sale price on the
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national securities market. Securities quoted on the NASD National Market System
are also valued at the last sale price. Other securities traded on
over-the-counter markets are valued on the basis of their closing
over-the-counter bid prices. Securities for which there were no transactions are
valued at the average of the most recent bid and asked prices. Investments in
debt securities with remaining maturities of 60 days or less are valued based
upon the amortized cost method. Restricted securities, securities for which
market quotations are not readily available, and other assets are valued at fair
value using methods determined by or under the supervision of the Board of
Trustees. An option is generally valued at the last sale price or, in the
absence of a last sale price, the last offer price. See "Valuation of
International Equity Fund" below for a description of the valuation of certain
foreign securities held by these Funds.
VALUATION OF THE INTERNATIONAL EQUITY FUND
------------------------------------------
In determining market value, the International Equity Fund's portfolio
securities which are primarily traded on a domestic exchange are valued at the
last sale price on that exchange or, if there is no recent sale, at the last
current bid quotation. Portfolio securities which are primarily traded on
foreign securities exchanges are generally valued at the preceding closing
values of such securities on their respective exchanges, except when an
occurrence subsequent to the time a value was so established is likely to have
changed such value, then the fair value of those securities may be determined
through consideration of other factors by or under the direction of the Board of
Trustees. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security. Investments in debt securities having a remaining maturity of 60
days or less are valued based upon the amortized cost method. All other
securities are valued at the last current bid quotation if market quotations are
available, or at fair value as determined in accordance with policies
established in good faith by the Board of Trustees. For valuation purposes,
quotations of foreign securities in foreign currency are converted to U.S.
dollars equivalent at the prevailing market rate on the day of valuation. An
option is generally valued at the last sale price or, in the absence of a last
sale price, the last offer price.
Certain of the securities acquired by the International Equity Fund may
be traded on foreign exchanges or over-the-counter markets on days on which the
Fund's net asset value is not calculated. In such cases, the net asset value of
the Fund's shares may be significantly affected on days when investors can
neither purchase nor redeem shares of the Fund.
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 or directly to the Fund
at P.O. Box 8421, Boston, MA 02266-8421. 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
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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 applicable Prospectuses, Class I
(formerly, Institutional) Shares of the Funds are sold to certain qualified
investors at their net asset value without a sales charge. Class A (formerly,
Retail) Shares of the Fund are sold to public investors at the public offering
price based on a Fund's net asset value plus a front-end load or sales charge as
described in the Prospectus for Class A, Class B and Class C Shares. Class B
Shares of the Money Market Fund and Tax Exempt Money Market Fund are available
only to the holders of Class B Shares of another Fund who wish to exchange their
Class B Shares of such other Fund for Class B Shares of the Money Market Fund
and/or the Tax Exempt Money Market Fund. Class B Shares of the Funds are sold to
public investors at net asset value but are subject to a contingent deferred
sales charge which is payable upon redemption of such shares as described in the
Prospectus for Class A, Class B and Class C Shares. Class C Shares of the Money
Market Fund are available only to the holders of Class C Shares of another Fund
who wish to exchange their Class C Shares of another Fund for Class C Shares of
the Money Market Fund. Class C Shares of the Funds are sold to public investors
at net asset value but are subject to a 1.00% contingent deferred sales charge
which is payable upon redemption of such shares within the first eighteen months
after purchase, as described in the Prospectus for Class A, Class B and Class C
Shares. There is no sales load or contingent deferred sales charge imposed for
shares acquired through the reinvestment of dividends or distributions on such
shares. From time to time, shares may be offered as an award in promotions
sponsored by the Distributor or other parties. The promotions may be limited to
certain classes of shareholders such as the employees of the Adviser or its
affiliates.
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For the fiscal year ended May 31, 1999, sales loads paid by shareholders of
Class A Shares were as follows:
<TABLE>
<CAPTION>
PORTFOLIO SALES LOADS FOR FISCAL YEAR ENDED 1999
<S> <C>
Armada International Equity Fund $ 11,506
Armada Small Cap Value Fund $ 51,484
Armada Small Cap Growth Fund $ 30,753
Armada Equity Growth Fund $102,093
Armada Tax Managed Equity Fund $193,147
Armada Core Equity Fund $ 25,206
Armada Equity Index Fund* $ 44,677
Armada Equity Income Fund $ 87,943
Armada Balanced Allocation Fund $ 29,030
Armada Total Return Advantage Fund $ 50,583
Armada Bond Fund $ 21,248
Armada Intermediate Bond Fund $ 12,524
Armada GNMA Fund $ 19,732
Armada Limited Maturity Bond Fund $ 965
Armada Ohio Tax Exempt Bond Fund $ 8,032
Armada Pennsylvania Municipal Bond Fund $ 3,797
Armada National Tax Exempt Bond Fund $ 3,898
Armada Money Market Fund $ 246
</TABLE>
*The Class A Shares of 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 Planned Investment
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"),
-70-
<PAGE> 115
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.
OFFERING PRICE PER CLASS 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 November 30, 1999, are as follows:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
-------------------------
<S> <C>
Net Assets of A Shares.................................................................. $ 2,117,831
Outstanding A Shares.................................................................... 146,365
Net Asset Value Per Share............................................................... $14.47
($14.47 divided by 94.5%)
Sales Charge, 5.50% of
offering price (5.80% of
net asset value per share).............................................................. $.84
Offering to Public...................................................................... $15.31
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE FUND
--------------------
<S> <C>
Net Assets of A Shares.................................................................. $10,568,587
Outstanding A Shares.................................................................... 796,873
Net Asset Value Per Share
($13.26 divided by 94.5%)............................................................... $13.26
Sales Charge, 5.50% of
offering price (5.79% of
net asset value per share).............................................................. $.77
Offering to Public...................................................................... $14.03
</TABLE>
-71-
<PAGE> 116
<TABLE>
<CAPTION>
SMALL CAP GROWTH FUND
---------------------
<S> <C>
Net Assets of A Shares.................................................................. $1,840,750
Outstanding A Shares.................................................................... 139,813
Net Asset Value Per Share
($13.17 divided by 94.5%)............................................................... $13.17
Sales Charge, 5.50% of
offering price (5.84% of
net asset value per share).............................................................. $.77
Offering to Public...................................................................... $13.94
</TABLE>
<TABLE>
<CAPTION>
EQUITY GROWTH FUND
------------------
<S> <C>
Net Assets of A Shares.................................................................. $174,026,225
Outstanding A Shares.................................................................... 6,282,636
Net Asset Value Per Share
($27.70 divided by 94.5%)............................................................... $27.70
Sales Charge, 5.50% of
offering price (5.82% of
net asset value per share).............................................................. $1.61
Offering to Public...................................................................... $29.31
</TABLE>
<TABLE>
<CAPTION>
TAX MANAGED EQUITY FUND
-----------------------
<S> <C>
Net Assets of A Shares.................................................................. $15,027,335
Outstanding A Shares.................................................................... 1,109,819
Net Asset Value Per Share
($13.54 divided by 94.5%)............................................................... $13.54
Sales Charge, 5.50% of
offering price (5.84% of
net asset value per share).............................................................. $.79
Offering to Public...................................................................... $14.33
</TABLE>
-72-
<PAGE> 117
<TABLE>
<CAPTION>
CORE EQUITY FUND
----------------
<S> <C>
Net Assets of A Shares.................................................................. $2,999,932
Outstanding A Shares.................................................................... 202,629
Net Asset Value Per Share
($14.80 divided by 94.5%)............................................................... $14.80
Sales Charge, 5.50% of
offering price (5.84% of
net asset value per share).............................................................. $.86
Offering to Public...................................................................... $15.66
</TABLE>
<TABLE>
<CAPTION>
EQUITY INDEX FUND
-----------------
<S> <C>
Net Assets of A Shares.................................................................. $5,987,763
Outstanding A Shares.................................................................... 498,626
Net Asset Value Per Share
($12.01 divided by 96.25%).............................................................. $12.01
Sales Charge, 3.75% of
offering price (3.90% of
net asset value per share).............................................................. $.47
Offering to Public...................................................................... $12.48
</TABLE>
<TABLE>
<CAPTION>
EQUITY INCOME FUND
------------------
<S> <C>
Net Assets of A Shares.................................................................. $11,865,193
Outstanding A Shares.................................................................... 687,173
Net Asset Value Per Share
($17.27 divided by 94.5%)............................................................... $17.27
Sales Charge, 5.50% of
offering price (5.80% of
net asset value per share).............................................................. $1.01
Offering to Public...................................................................... $18.28
</TABLE>
-73-
<PAGE> 118
<TABLE>
<CAPTION>
BALANCED ALLOCATION FUND
------------------------
<S> <C>
Net Assets of A Shares.................................................................. $3,878,509
Outstanding A Shares.................................................................... 349,662
Net Asset Value Per Share
($11.09 divided by 95.25%).............................................................. $11.09
Sales Charge, 4.75% of
offering price (4.75% of
net asset value per share).............................................................. $.55
Offering to Public...................................................................... $11.64
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN ADVANTAGE FUND
---------------------------
<S> <C>
Net Assets of A Shares.................................................................. $6,267,202
Outstanding A Shares.................................................................... 647,738
Net Asset Value Per Share
($9.68 divided by 95.25%)............................................................... $9.68
Sales Charge, 4.75% of
offering price (5.01% of
net asset value per share).............................................................. $.48
Offering to Public...................................................................... $10.16
</TABLE>
-74-
<PAGE> 119
<TABLE>
<CAPTION>
BOND FUND
---------
<S> <C>
Net Assets of A Shares.................................................................. $3,383,857
Outstanding A Shares.................................................................... 348,386
Net Asset Value Per Share
($9.71 divided by 95.25%)............................................................... $9.71
Sales Charge, 4.75% of
offering price (5.01% of
net asset value per share).............................................................. $.48
Offering to Public...................................................................... $10.12
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND
----------------------
<S> <C>
Net Assets of A Shares.................................................................. $4,889,821
Outstanding A Shares.................................................................... 477,565
Net Asset Value Per Share
($10.24 divided by 95.25%).............................................................. $10.24
Sales Charge, 4.75% of
offering price (5.00% of
net asset value per share).............................................................. $.51
Offering to Public...................................................................... $10.75
</TABLE>
-75-
<PAGE> 120
<TABLE>
<CAPTION>
GNMA FUND
---------
<S> <C>
Net Assets of A Shares.................................................................. $1,227,209
Outstanding A Shares.................................................................... 123,974
Net Asset Value Per Share
($9.90 divided by 95.25%).............................................................. $9.90
Sales Charge, 4.75% of
offering price (4.95% of
net asset value per share)*............................................................. $.49
Offering to Public...................................................................... $10.39
</TABLE>
<TABLE>
<CAPTION>
LIMITED MATURITY BOND FUND
--------------------------
<S> <C>
Net Assets of A Shares.................................................................. $528,670
Outstanding A Shares.................................................................... 53,367
Net Asset Value Per Share
($9.91 divided by 97.25%)............................................................... $9.91
Sales Charge, 2.75% of
offering price (2.80% of
net asset value per share).............................................................. $.28
Offering to Public...................................................................... $10.19
</TABLE>
<TABLE>
<CAPTION>
OHIO TAX EXEMPT BOND FUND
-------------------------
<S> <C>
Net Assets of A shares.................................................................. $6,329,797
Outstanding A shares.................................................................... 595,193
Net Asset Value Per Share
($10.63 divided by 97.0%)............................................................... $10.63
Sales Charge, 3.00% of
offering price (3.09% of
net asset value per share).............................................................. $.33
Offering to Public...................................................................... $10.96
</TABLE>
-76-
<PAGE> 121
<TABLE>
<CAPTION>
PENNSYLVANIA MUNICIPAL BOND FUND
--------------------------------
<S> <C>
Net Assets of A shares.................................................................. $128,243
Outstanding A shares.................................................................... 12,733
Net Asset Value Per Share
($10.07 divided by 97.0%)............................................................... $10.07
Sales Charge, 3.00% of
offering price (3.08% of
net asset value per share).............................................................. $.31
Offering to Public...................................................................... $10.38
</TABLE>
<TABLE>
<CAPTION>
NATIONAL TAX EXEMPT BOND FUND
-----------------------------
<S> <C>
Net Assets of A shares.................................................................. $4,280,879
Outstanding A shares.................................................................... 2,635,974
Net Asset Value Per Share
($9.67 divided by 95.25%)............................................................... $9.67
Sales Charge, 4.75% of
offering price (5.02% of
net asset value per share).............................................................. $.48
Offering to Public...................................................................... $10.15
</TABLE>
<TABLE>
<CAPTION>
MID CAP GROWTH FUND
-------------------
<S> <C>
Net Assets of A Shares.................................................................. $44,315,277
Outstanding A Shares.................................................................... 2,635,974
Net Asset Value Per Share
($16.81 divided by 94.5%)............................................................... $16.81
Sales Charge, 5.50% of
offering price (5.79% of
net asset value per share).............................................................. $.98
Offering to Public...................................................................... $17.79
</TABLE>
-77-
<PAGE> 122
<TABLE>
<CAPTION>
LARGE CAP ULTRA FUND
--------------------
<S> <C>
Net Assets of A Shares.................................................................. $24,362,750
Outstanding A Shares.................................................................... $1,057,356
Net Asset Value Per Share
($23.04 divided by 94.5%)............................................................... $23.04
Sales Charge, 5.50% of
offering price (5.84% of
net asset value per share).............................................................. $1.34
Offering to Public...................................................................... $24.38
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
---------------------------
<S> <C>
Net Assets of A Shares.................................................................. $25,093,070
Outstanding A Shares.................................................................... 2,800,352
Net Asset Value Per Share
($8.96 divided by 95.25%)............................................................... $8.96
Sales Charge, 4.75% of
offering price (4.95% of
net asset value per share)*............................................................. $.45
Offering to Public...................................................................... $9.41
</TABLE>
<TABLE>
<CAPTION>
MICHIGAN MUNICIPAL BOND FUND
----------------------------
<S> <C>
Net Assets of A shares.................................................................. $21,273,815
Outstanding A shares.................................................................... 2,014,218
Net Asset Value Per Share
($10.56 divided by 97.0%)............................................................... $10.56
Sales Charge, 3.00% of
offering price (3.08% of
net asset value per share).............................................................. $.53
Offering to Public...................................................................... $11.09
</TABLE>
-78-
<PAGE> 123
EXCHANGE PRIVILEGE
------------------
Investors may exchange all or part of their Class A Shares,
Class B Shares or Class C Shares as described in the applicable Prospectus. Any
rights an Investor may have (o r have waived) to reduce the sales load
applicable to an exchange, as may be provided in such 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, website 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
Class A Shares, Class B Shares or Class C Shares and the 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 Prospectuses, including classes or series,
which represent interests in the Funds as follows, and as further described in
this Statement of Additional Information and the related Prospectuses:
<TABLE>
<CAPTION>
Money Market Fund
<S> <C>
Class A Class I Shares
Class A - Special Series 1 Class A Shares
Class A - Special Series 2 Class B Shares
Class A - Special Series 3 Class C Shares
Government Money Market Fund
Class B Class I Shares
Class B - Special Series 1 Class A Shares
Treasury Money Market Fund
Class C Class I Shares
Class C - Special Series 1 Class A Shares
Tax Exempt Money Market Fund
Class D Class I Shares
Class D - Special Series 1 Class A Shares
Class D - Special Series 2 Class B Shares
</TABLE>
-79-
<PAGE> 124
<TABLE>
<CAPTION>
Equity Growth Fund
<S> <C>
Class H Class I Shares
Class H - Special Series 1 Class A Shares
Class H - Special Series 2 Class B Shares
Class H - Special Series 3 Class C Shares
Intermediate Bond Fund
Class I Class I Shares
Class I - Special Series 1 Class A Shares
Class I - Special Series 2 Class B Shares
Class I - Special Series 3 Class C Shares
Ohio Tax Exempt Bond Fund
Class K Class I Shares
Class K - Special Series 1 Class A Shares
Class K - Special Series 2 Class B Shares
Class K - Special Series 3 Class C Shares
National Tax Exempt Bond Fund
Class L Class I Shares
Class L - Special Series 1 Class A Shares
Class L - Special Series 2 Class B Shares
Class L - Special Series 3 Class C Shares
Equity Income Fund
Class M Class I Shares
Class M - Special Series 1 Class A Shares
Class M - Special Series 2 Class B Shares
Class M - Special Series 3 Class C Shares
Small Cap Value Fund
Class N Class I Shares
Class N - Special Series 1 Class A Shares
Class N - Special Series 2 Class B Shares
Class N - Special Series 3 Class C Shares
Limited Maturity Bond Fund
Class O Class I Shares
Class O - Special Series 1 Class A Shares
Class O - Special Series 2 Class B Shares
Class O - Special Series 3 Class C Shares
Total Return Advantage Fund
Class P Class I Shares
Class P - Special Series 1 Class A Shares
Class P - Special Series 2 Class B Shares
Class P - Special Series 3 Class C Shares
Pennsylvania Tax Exempt Money Market Fund
Class Q Class I Shares
Class Q - Special Series 1 Class A Shares
</TABLE>
-80-
<PAGE> 125
<TABLE>
<CAPTION>
Bond Fund
<S> <C>
Class R Class I Shares
Class R - Special Series 1 Class A Shares
Class R - Special Series 2 Class B Shares
Class R - Special Series 3 Class C Shares
GNMA Fund
Class S Class I Shares
Class S - Special Series 1 Class A Shares
Class S - Special Series 2 Class B Shares
Class S - Special Series 3 Class C Shares
Pennsylvania Tax Exempt Bond Fund
Class T Class I Shares
Class T - Special Series 1 Class A Shares
Class T - Special Series 2 Class B Shares
Class T - Special Series 3 Class C Shares
</TABLE>
-81-
<PAGE> 126
<TABLE>
<CAPTION>
International Equity Fund
<S> <C>
Class U Class I Shares
Class U - Special Series 1 Class A Shares
Class U - Special Series 2 Class B Shares
Class U - Special Series 3 Class C Shares
Equity Index Fund
Class V Class I Shares
Class V - Special Series 1 Class A Shares
Class V - Special Series 2 Class B Shares
Class V - Special Series 3 Class C Shares
Core Equity Fund
Class W Class I Shares
Class W - Special Series 1 Class A Shares
Class W - Special Series 2 Class B Shares
Class W - Special Series 3 Class C Shares
Small Cap Growth Fund
Class X Class I Shares
Class X - Special Series 1 Class A Shares
Class X - Special Series 2 Class B Shares
Class X - Special Series 3 Class C Shares
Tax Managed Equity Fund
Class Z Class I Shares
Class Z - Special Series 1 Class A Shares
Class Z - Special Series 2 Class B Shares
Class Z - Special Series 3 Class C Shares
Balanced Allocation Fund
Class AA Class I Shares
Class AA - Special Series 1 Class A Shares
Class AA - Special Series 2 Class B Shares
Class AA - Special Series 3 Class C Shares
Ohio Municipal Money Market Fund
Class BB Class I Shares
Class BB - Special Series 1 Class A Shares
Treasury Plus Money Market Fund
Class CC Class I Shares
Class CC - Special Series 1 Class A Shares
U.S. Government Income Fund
Class DD Class I Shares
Class DD - Special Series 1 Class A Shares
Class DD - Special Series 2 Class B Shares
Class DD - Special Series 3 Class C Shares
</TABLE>
-82-
<PAGE> 127
<TABLE>
<CAPTION>
Mid Cap Growth Fund
<S> <C>
Class GG Class I Shares
Class GG - Special Series 1 Class A Shares
Class GG - Special Series 2 Class B Shares
Class GG - Special Series 3 Class C Shares
Michigan Municipal Bond Fund
Class HH Class I Shares
Class HH - Special Series 1 Class A Shares
Class HH - Special Series 2 Class B Shares
Class HH - Special Series 3 Class C Shares
Large Cap Ultra Fund
Class II Class I Shares
Class II - Special Series 1 Class A Shares
Class II - Special Series 2 Class B Shares
Class II - Special Series 3 Class C Shares
</TABLE>
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
Class I Shares and Class 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, only Class B Shares of a Fund will be
entitled to vote on matters relating to a distribution plan with respect to
Class B Shares, and only Class C Shares of a Fund will be entitled to vote on
matters relating to a distribution plan with respect to Class C Shares.
-83-
<PAGE> 128
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
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.
-84-
<PAGE> 129
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 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 TAX EXEMPT BOND, PENNSYLVANIA
----------------------------------------------------------------------------
MUNICIPAL BOND, NATIONAL TAX EXEMPT BOND AND TAX EXEMPT MONEY MARKET FUNDS.
---------------------------------------------------------------------------
As described above and in the Prospectus, the Ohio Tax Exempt
Bond, Pennsylvania Municipal Bond, National Tax Exempt Bond, Ohio Municipal
Money Market, Pennsylvania Tax Exempt Money Market and Tax Exempt Money 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
-85-
<PAGE> 130
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 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 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
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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 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.
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<PAGE> 132
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 or instrumentalities of Ohio or its political subdivisions (Ohio
Obligations).
Shareholders otherwise subject to the Ohio corporation
franchise tax will not be required to include Distributions in their tax base
for purposes of calculating the Ohio corporation franchise tax on the net income
basis to the extent that such distributions either (a) are properly attributable
to interest on or gain from the sale of Ohio Obligations, (b) represent
"exempt-interest dividends" for federal income tax purposes, or (c) are
described in both (a) and (b). Shares of the Fund will be included in a
Shareholder's tax base for purposes of computing the Ohio corporation franchise
tax on the net worth basis.
Distributions that consist of interest on obligations of the
United States or its territories or possessions or of any authority, commission,
or instrumentality of the United States that is exempt from state income taxes
under the laws of the United States (including obligations issued by the
governments of Puerto Rico, the Virgin Islands or Guam and their authorities or
municipalities) ("Territorial Obligations") are exempt from the Ohio personal
income tax, and municipal and school district income taxes in Ohio, and,
provided, in the case of Territorial Obligations, such interest is excluded from
gross income for federal income tax purposes, are excluded from the net income
base of the Ohio corporation franchise tax.
It is assumed for purposes of this discussion of State and
Local Taxes that the Fund will continue to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended, and that at all
times at least 50% of the value of the total assets of the Fund consists of Ohio
Obligations or similar obligations of other states or their subdivisions.
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<PAGE> 133
TRUSTEES AND OFFICERS
---------------------
The trustees and executive officers of the Trust, their ages,
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 66 1994; Director, Strategic Distribution,
Inc., since January 1999. Trustee,
Parkstone Group of Funds and Armada
Advantage Fund, since 1998.
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. Trustee,
Parkstone Group of Funds and Armada
Advantage Fund, since 1998
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 74 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.
Trustee, Parkstone Group of Funds and
Armada Advantage Fund, since 1998
</TABLE>
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<PAGE> 134
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
---------------- ------------ ----------------------
<S> <C> <C>
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, Kittle's
Age 55 Bloomington Properties LLC, since
January 1981; partner, KK&D LLC, since
January 1989; partner, KK&D II LLC,
since February 1998; (affiliated real
estate companies of Kittle's Home
Furnishings Center, Inc.). Trustee,
Parkstone Group of Funds and Armada
Advantage Fund, since 1998
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 63 October 1997; Director, National City
Bank until October 1997; Director,
Republic Engineered Steels, October 1997
to September 1998. Trustee, Parkstone
Group of Funds and Armada Advantage
Fund, since 1998
Richard W. Furst Trustee Garvice D. Kincaid Professor of Finance
2133 Rothbury Road and Dean, Gatton College of Business and
Lexington, KY 40515 Economics, University of Kentucky, since
Age 61 1981; Director, The Seed Corporation
(restaurant group), since 1990;
Director; Foam Design, Inc.,
(manufacturer of industrial and
commercial foam products), since 1993;
Director, Office Suites Plus, Inc.
(office buildings) since 1999; Director,
ihigh.com, Inc., (Internet company)
since 1999; Trustee, Parkstone Group of
Funds and Armada Advantage Fund, since 1998
Gerald L. Gherlein Trustee Retired; formerly, the Executive
3679 Greenwood Drive Vice-President and General Counsel, Eaton
Pepper Pike, OH 44124 Corporation, from 1991 to March 2000 (global
Age 62 manufacturing); Trustee, Parkstone Group
of Funds and Armada Advantage Fund,
since 1998
</TABLE>
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<PAGE> 135
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
---------------- ------------ ----------------------
<S> <C> <C>
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 66 (rental subsidiary of Whayne Supply
Co.), since 1988. Trustee, Parkstone
Group of Funds and Armada Advantage
Fund, since 1998
W. Bruce McConnel, III Secretary Partner, Drinker Biddle & Reath LLP,
One Logan Square Philadelphia, Pennsylvania (law firm).
18th and Cherry Streets
Philadelphia, PA 19103-6996
Age 57
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>
--------------------
*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.
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.
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<PAGE> 136
Mr. Leven is employed by SEI Investments Mutual Funds
Services, which receives fees as Administrator 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 Armada 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 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 Armada Advantage Fund (formerly known as The Parkstone
Advantage Fund). Each of the Trustees serves as Trustee to all three
investment companies. The Trustees became trustees of The Parkstone
Group of Funds and the Armada 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
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<PAGE> 137
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.
CODE OF ETHICS
--------------
The Trust, IMC and the Distributor have each adopted codes of
ethics under Rule 17j-l of the 1940 Act that (i) establish procedures for
personnel with respect to personal investing, (ii) prohibit or restrict certain
transactions that may be deemed to create a conflict of interest between
personnel and the Funds and (iii) permit personnel to invest in securities,
including securities that may be purchased or held by the Funds.
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)
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<PAGE> 138
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 Limited Maturity Bond 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 Money Market, 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 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 Limited Maturity Bond
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
$85 billion in assets, and headquarters in Cleveland, Ohio and over 1,300 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 Limited Maturity Bond Funds then in
effect, the Trust incurred advisory
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<PAGE> 139
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 Limited
Maturity Bond 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) $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
$866,399, 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
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<PAGE> 140
$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 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.
Unless sooner terminated, the Advisory Agreements will
continue in effect with respect to the Funds to which they relate until
September 30, 1999 and from year to year thereafter, subject to annual approval
by the Trust's Board of Trustees, or by a vote of a majority of the outstanding
shares of such Funds (as defined in the Funds' Prospectus) and a majority of the
trustees who are not parties to the Agreement or interested persons (as defined
in the 1940 Act) of any party by votes cast in person at a meeting called for
such purpose. The Advisory Agreements and Sub-Advisory Agreement may be
terminated by the Trust or the Adviser or sub-advisers on 60 days written
notice, and will terminate immediately in the event of its assignment.
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ADMINISTRATION AGREEMENT AND SUB-ADMINISTRATION AGREEMENT
---------------------------------------------------------
The Trust and SEI Investments Mutual Funds 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.
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 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.
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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 Fund and
National Tax Exempt Bond 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 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 Limited
Maturity Bond 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 Limited Maturity Bond 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 Limited Maturity Bond 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.
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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 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 ended April 30, 1998 with respect to the
Pennsylvania Tax Exempt Bond Fund. For the period from September 9, 1996 (date
or reorganization of the Predecessor Fund) until May 31, 1997, PFPC earned
administration fees of $26,845 with respect to the Pennsylvania Tax Exempt Bond
Fund. For the period from June 1, 1996 until September 9, 1996 and for the
one-month period ended May 31, 1996 SEI Financial Management Corporation, a
wholly-owned subsidiary of SEI Corporation, served as administrator to the
Predecessor Fund and earned the following fees: $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 Money Market 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 Money
Market 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
Money Market, Tax Exempt, Money Market, Government, and Treasury
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Funds. For the period from May 1, 1998 through May 31, 1998, the Administrator
earned administration fees of $5,562, $29,782, $138,647, $68,244, and $18,670
with respect to the Pennsylvania Tax Exempt Money Market, 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.
Pursuant to Rule 12b-1 of the 1940 Act, the Trust has adopted
a Service and Distribution Plan for Class A Shares and Class I Shares (the "A
and I Shares Plan"), a Class B Shares Distribution and Servicing Plan ("B Shares
Plan"), and a Class C Shares Plan (the "C Shares Plan," and, collectively, the
"Distribution Plans") which permit the Trust to bear certain expenses in
connection with the distribution of Class I Shares and Class A Shares, Class B
Shares, or Class C 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 a Distribution Plan that would materially
increase the distribution expenses of a class would require approval by the
shareholders of such class, but otherwise, such Distribution Plan may be amended
by the trustees, including a majority of the disinterested trustees who do not
have any direct or indirect financial interest in the particular Plan or related
agreement. The Distribution Plans and related agreement may be terminated as to
a particular Fund or class by a vote of the Trust's disinterested trustees or by
vote of the shareholders of the Fund or class in question, on not more than 60
days written notice. The selection and nomination of disinterested trustees has
been committed to the discretion of such disinterested trustees as required by
the Rule.
The A and I Shares Plan provides that each fund will reimburse
the Distributor for distribution expenses related to the distribution of Class A
Shares and Class 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 Class B
Shares in an amount not to exceed .75% of the average net assets of such class.
The C Shares Plan
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provides that each C share class will compensate the Distributor for
distribution of Class C Shares. 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 Class A Shares and Class I 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 Class I
Shares and Class A Shares.
The Distribution Plans have been approved by the Board of
Trustees, and will continue in effect for successive one year periods provided
that such continuance is specifically approved by (1) the vote of a majority of
the trustees who are not parties to either Plan or interested persons of any
such party and who have no direct or indirect financial interest in either Plan
and (2) the vote of a majority of the entire Board of Trustees.
For the fiscal year ended May 31, 1999, no Class C Shares were
issued or outstanding. During this same period, 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:
FISCAL YEAR 1999 DISTRIBUTION FEES
<TABLE>
<CAPTION>
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
Limited Maturity Bond Fund $0
Ohio Tax Exempt Bond Fund $18,062 $42,145 $60,207
</TABLE>
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<PAGE> 146
<TABLE>
<CAPTION>
PORTFOLIO DISTRIBUTION MARKETING/ TOTAL FEES
SERVICES CONSULTATION
<S> <C> <C> <C>
Pennsylvania Tax Exempt 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 Fund N/A
Michigan Municipal Bond Fund N/A
Treasury Plus Money Market Fund N/A
</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:
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(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;
(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;
(v) make periodic reports 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 period (as well as the dividends paid during the current period 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 Class A Shares, the B Shares Plan for each Fund's Class B Shares and
the C Shares Plan for each Fund's Class C Shares. Pursuant to the Shareholder
Services Plan and B Shares Plan, the Trust may enter into agreements with
financial institutions pertaining to the provision of administrative
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<PAGE> 148
services to their customers who are the beneficial owners of Class A Shares or
Class 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 Large Cap Ultra Funds, of the net asset value
of such shares.
Pursuant to the Shareholder Services Plan and B Shares Plan,
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 Class A Shares or Class B Shares in consideration for the
payment of up to .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, and the Limited Maturity Bond Fund (B Shares only), of the net
asset value of such shares.
Pursuant to the Shareholder Services Plan and B Shares Plan,
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 Class A Shares or Class B Shares in consideration for the
payment of up to .10% (on an annualized basis), in the case of the Ohio Tax
Exempt Bond, Pennsylvania Municipal Bond, National Tax Exempt Bond and Michigan
Municipal Bond Funds, and the Limited Maturity Bond Fund (A Shares only), of the
net asset value of such shares.
Pursuant to the C Shares Plan, 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
Class C Shares in consideration for the payment of up to .25% (on an annualized
basis), of the net asset value of such shares. Such services may include:
(i) aggregating and processing purchase and redemption
requests from customers;
(ii) providing customers with a service that invests the
assets of their accounts in Class A Shares, Class B
Shares or Class C Shares;
(iii) processing dividend
payments from the Funds;
(iv) providing information periodically to customers
showing their position in Class A Shares, Class B
Shares or Class C Shares;
(v) arranging for bank wires;
(vi) responding to customer inquiries relating to the
services performed with respect to Class A Shares,
Class B Shares or Class C 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.
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<PAGE> 149
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,
respectively. For the same periods, the Intermediate Bond and Limited Maturity
Bond 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
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<PAGE> 150
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 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.
The Adviser to the Fund has agreed to maintain a policy and
practice of conducting its investment management activities independently of its
respective commercial departments all of the Adviser's affiliates. In making
investment recommendations for the Trust, the Adviser's personnel will not
inquire or take into consideration whether the issuer of securities proposed for
purchase or sale for the Trusts' accounts are customers of the commercial
departments of all of the Adviser's affiliates.
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<PAGE> 151
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.
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
for each of the Funds, except for the Armada Balanced Allocation Fund, and the
statement of asset and liabilities, including portfolio of investments, of the
Armada Balanced Allocation Fund as of May 31, 1999, and the related statement of
operations, statements of changes in net assets, and financial highlights for
each of the Funds for each of the periods indicated in the 1999 Annual Report to
Shareholders 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 from April 30, 1995 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 incorporated by reference in
reliance upon such report given on the authority of such firm 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 from April 30, 1995 through May 31, 1996, which are
incorporated by reference in this Statement of Additional Information, were
audited by PricewaterhouseCoopers LLP, independent accountants, whose report
dated July 26, 1996 expressed an unqualified opinion on such financial
highlights,
-107-
<PAGE> 152
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The financial highlights and financial statements for the
Armada Bond Fund, Armada Mid Cap Growth Fund, Armada Large Cap Ultra Fund,
Armada U.S. Government Income Fund, Armada Michigan Municipal Bond Fund and
Armada Treasury Plus Money Market Fund (collectively, the "Predecessor Parkstone
Funds"), which are incorporated by reference into this Statement of Additional
Information, are of each Fund's predecessor portfolio of Parkstone. The
financial highlights and financial statements for the fiscal year ended May 31,
1999 were audited by PricewaterhouseCoopers LLP, Parkstone's independent
accountants. The financial highlights and financial statements for the
semi-annual period ended November 30, 1999 are unaudited.
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 Public Square, Cleveland, Ohio
44114-1304 act as special Ohio tax counsel for the Trust and have reviewed the
sections of this Statement of Additional Information entitled "Special Risk
Considerations Regarding Investment in Ohio Municipal Securities."
PERFORMANCE INFORMATION
-----------------------
YIELD FOR THE FIXED INCOME FUNDS AND TAX-EXEMPT FUNDS
-----------------------------------------------------
Each Fund's "yield" described in the Prospectuses is
calculated by dividing the Fund's net investment income per share earned during
a 30-day period (or another period permitted by the rules of the SEC) by the net
asset value per share on the last day of the period and annualizing the result
on a semi-annual basis by adding one to the quotient, raising the sum to the
power of six, subtracting one from the result and then doubling the difference.
The Fund's net investment income per share earned during the period is based on
the average daily number of shares outstanding during the period entitled to
receive dividends and includes dividends and interest earned during the period
minus expenses accrued for the period, net of reimbursements. This calculation
can be expressed as follows:
a-b to the 6th power
Yield = 2 [(------) - 1]
cd + 1
Where: a = dividends and interest earned during the period.
-108-
<PAGE> 153
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = maximum offering price per share on the last day
of the period.
The Fixed Income Funds and Tax-Exempt 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.
-109-
<PAGE> 154
For the period ended November 30, 1999, no Class C Shares were
issued or outstanding. Accordingly, no performance information is available for
Class C Shares.
For the 30-day period ended November 30, 1999, the yields and.
as applicable, the tax-equivalent yields of the Class I Shares of Total Return
Advantage, Bond, Intermediate Bond, GNMA, Limited Maturity Bond, Ohio Tax Exempt
Bond, Pennsylvania Municipal Bond, National Tax Exempt Bond, U.S. Government
Income and Michigan Municipal Bond Funds were:
<TABLE>
<CAPTION>
TAX-
----
EQUIVALENT
----------
FUND STANDARD YIELD YIELD
---- -------------- -----
<S> <C> <C>
Total Return Advantage.............................................. 6.38% *
Bond................................................................ 6.35% *
Intermediate Bond................................................... 6.32% *
GNMA................................................................ 6.16% *
Limited Maturity Bond............................................... 6.08% *
Ohio Tax Exempt Bond................................................ 4.55% 8.52%
Pennsylvania Municipal Bond......................................... 4.49% 7.80%
National Tax Exempt Bond............................................ 5.48% 9.07%
U.S. Government Income.............................................. 6.08% *
Michigan Municipal Bond............................................. 4.22% 7.54%
</TABLE>
----------------------
* Not applicable
For the 30-day period ended November 30, 1999, the yields and.
as applicable, the tax-equivalent yields of the Class A Shares of the Total
Return Advantage, Bond, Intermediate Bond, GNMA, Limited Maturity Bond, Ohio Tax
Exempt Bond, Pennsylvania Municipal Bond, National Tax Exempt Bond, U.S.
Government Income and Michigan Municipal Bond Funds were:
<TABLE>
<CAPTION>
TAX-
----
EQUIVALENT
----------
FUND STANDARD YIELD YIELD
---- -------------- -----
<S> <C> <C>
Total Return Advantage.............................................. 5.84% *
Bond................................................................ 5.78% *
Intermediate Bond................................................... 5.72% *
GNMA................................................................ 5.62% *
Limited Maturity Bond............................................... 5.80% *
Ohio Tax Exempt Bond................................................ 4.31% 8.07%
Pennsylvania Municipal Bond......................................... 4.26% 7.40%
National Tax Exempt Bond............................................ 5.13% 8.49%
U.S. Government Income.............................................. 5.99% *
Michigan Municipal Bond............................................. 3.77% 6.73%
</TABLE>
----------------------
* Not applicable
For the 30-day period ended November 30, 1999, the yields and,
as applicable, the tax-equivalent yields of the Class B Shares of the Total
Return Advantage, Bond, Intermediate Bond, GNMA, Limited Maturity Bond, Ohio Tax
Exempt Bond, Pennsylvania Municipal Bond, National Tax Exempt Bond, U.S.
Government Income and Michigan Municipal Bond Funds were:
-110-
<PAGE> 155
<TABLE>
<CAPTION>
TAX-
----
EQUIVALENT
----------
FUND STANDARD YIELD YIELD
---- -------------- -----
<S> <C> <C>
Total Return Advantage.............................................. 6.74% *
Bond................................................................ 5.35% *
Intermediate Bond................................................... 5.35% *
GNMA................................................................ 5.28% *
Limited Maturity Bond............................................... 5.96% *
Ohio Tax Exempt Bond................................................ N/A% *
Pennsylvania Municipal Bond......................................... N/A% *
National Tax Exempt Bond............................................ 4.72% 7.81%
U.S. Government Income.............................................. 5.04% *
Michigan Municipal Bond............................................. 3.18% 5.68%
</TABLE>
----------------------
* Not applicable
The tax equivalent yields provided in the tables above assumed
a 39.6% federal tax rate for each Fund; and a 6.799% Ohio tax rate for the Ohio
Tax Exempt Bond Fund; a 2.8% Pennsylvania tax rate for the Pennsylvania Tax
Exempt Bond Fund; and a 4.4% Michigan tax rate for the Michigan Municipal Bond
Fund.
YIELDS FOR THE MONEY MARKET FUNDS
---------------------------------
The standardized annualized seven-day yields for the Money Market Funds
are computed by: (1) determining the net change, exclusive of capital changes
and income other than investment income, in the value of a hypothetical
pre-existing account in a Money Market Fund having a balance of one share at the
beginning of a seven-day period, for which the yield is to be quoted, (2)
dividing the net change in account value by the value of the account at the
beginning of the base period to obtain the base period return, and (3)
annualizing the results (i.e., multiplying the base period return by (365/7)).
The net change in the value of the account in each Money Market Fund 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, and all fees that are charged by a Money Market Fund to all shareholder
accounts in proportion to the length of the base period, other than
non-recurring account and sales charges. For any account fees that vary with the
size of the account, the amount of fees charged is computed with respect to the
Money Market Fund's 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 compound yield quotation for each Money Market Fund
is computed by adding 1 to the unannualized base period return (calculated as
described above), raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result.
In addition, the Ohio Municipal Money Market Fund, Pennsylvania
Tax-Exempt Money Market and Tax Exempt Money Market Fund may calculate a "tax
equivalent yield." The tax equivalent yield is computed by dividing that portion
of a Fund's yield which is tax-exempt by
-111-
<PAGE> 156
one minus a stated income tax rate and adding the product to that portion, if
any, of the Fund's computed yield that is not tax-exempt. Tax equivalent yields
assume the payment of federal income taxes at a rate of 39.6%.
For the seven-day period ended November 30, 1999, the annualized yields
and effective yields for Class A Shares of the Money Market, Government Money
Market, Treasury Money Market, Treasury Plus Money Market, Tax-Exempt Money
Market, Ohio Municipal Money Market and Pennsylvania Tax Exempt Money Market
Funds, and the tax-equivalent yield for Class A Shares of the Tax-Exempt Money
Market, Ohio Municipal Money Market and Pennsylvania Tax Exempt Money Market
Funds were:
<TABLE>
<CAPTION>
TAX-
----
ANNUALIZED EFFECTIVE EQUIVALENT
---------- --------- ----------
FUND YIELD YIELD YIELD
---- ----- ----- -----
<S> <C> <C> <C>
Money Market........................................................ 5.22% 5.36% *
Government Money Market............................................. 5.12% 5.25% *
Treasury Money Market............................................... 4.35% 4.45% *
Treasury Plus Money Market.......................................... 4.89% 5.01% *
Tax-Exempt Money Market............................................. 3.23% 3.28% 5.41%
Ohio Municipal Money Market......................................... 3.23% 3.28% 6.12%
Pennsylvania Tax Exempt Money Market................................ 3.27% 3.33% 5.76%
</TABLE>
----------------------
* Not applicable
The tax equivalent yields provided in the tables above assumed
a 39.6% federal tax rate for each Fund; and a 6.799% Ohio tax rate for the Ohio
Municipal Money Market Fund; and a 2.8% Pennsylvania tax rate for the
Pennsylvania Tax Exempt Money Market Fund.
For the seven-day period ended November 30, 1999, the annualized yields
and effective yields for Class I Shares of the Money Market, Government Money
Market, Treasury Money Market, Treasury Plus Money Market, Tax-Exempt Money
Market, Ohio Municipal Money Market and Pennsylvania Tax Exempt Money Market
Funds, and the tax-equivalent yield for Class A Shares of the Tax-Exempt Money
Market, Ohio Municipal Money Market and Pennsylvania Tax Exempt Money Market
Funds were:
<TABLE>
<CAPTION>
TAX-
----
ANNUALIZED EFFECTIVE EQUIVALENT
---------- --------- ----------
FUND YIELD YIELD YIELD
---- ----- ----- -----
<S> <C> <C> <C>
Money Market........................................................ 5.37% 5.52% *
Government Money Market............................................. 5.27% 5.40% *
Treasury Money Market............................................... 4.50% 4.60% *
Treasury Plus Money Market.......................................... 4.99% 5.12% *
Tax-Exempt Money Market............................................. 3.38% 3.43% 5.41%
Ohio Municipal Money Market......................................... 3.38% 3.48% 6.12%
Pennsylvania Tax Exempt Money Market................................ 3.42% 3.48% 6.04%
</TABLE>
----------------------
* Not applicable
-112-
<PAGE> 157
The tax equivalent yields provided in the tables above assumed
a 39.6% federal tax rate for each Fund; and a 6.799% Ohio tax rate for the Ohio
Municipal Money Market Fund; and a 2.8% Pennsylvania tax rate for the
Pennsylvania Tax Exempt Money Market Fund.
For the seven-day period ended November 30, 1999, the annualized yield
and effective yield for Class B Shares of the Money Market and Tax Exempt Money
Market Funds, and the tax equivalent yield for the Class B Shares of the Tax
Exempt Money Market Fund were:
<TABLE>
<CAPTION>
TAX-
----
ANNUALIZED EFFECTIVE EQUIVALENT
---------- --------- ----------
FUND YIELD YIELD YIELD
---- ----- ----- -----
<S> <C> <C> <C>
Money Market........................................................ 4.51% 4.61% *
Tax-Exempt Money Market............................................. * * *
</TABLE>
----------------------
* Not applicable
TOTAL RETURN
------------
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:
ERV to the 1/nth power
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:
-113-
<PAGE> 158
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.
For the period ended November 30, 1999, no Class C Shares
were issued or outstanding. Accordingly, no performance information is
available for Class C Shares.
<TABLE>
<CAPTION>
Annualized Total Return
Annualized Total Return From Inception Through
From Inception Through 11/30/99 (without
11/30/99 (with Deduction of Deduction for
Maximum Sales Charge) Any Sales Charge) Inception Date
--------------------- ----------------- --------------
<S> <C> <C> <C>
Armada International Equity Fund
Class A 14.60% 17.40% 08/01/97
Class B 23.71% 25.87% 01/06/98
Class I N/A 17.77% 08/01/97
Armada Small Cap Value Fund
Class A 11.83% 13.03% 08/15/94
Class B -2.62% -4.95% 01/06/98
Class I N/A 13.83% 7/26/94
Armada Small Cap Growth Fund
Class A 10.49% 13.19% 08/01/97
Class B 9.33% 11.74% 01/06/98
Class I N/A 13.48% 8/01/97
Armada Equity Growth Fund
Class A 15.66% 16.42% 04/15/91
Class B 20.30% 22.51% 01/06/98
Class I N/A 16.90% 12/20/89
Armada Tax Managed Equity Fund
Class A 16.92% 21.27% 5/11/98
Class B 16.20% 19.09% 05/04/98
Class I N/A 20.47% 4/09/98
</TABLE>
-114-
<PAGE> 159
<TABLE>
<CAPTION>
Annualized Total Return
Annualized Total Return From Inception Through
From Inception Through 11/30/99 (without
11/30/99 (with Deduction of Deduction for
Maximum Sales Charge) Any Sales Charge) Inception Date
--------------------- ----------------- --------------
<S> <C> <C> <C> <C>
Armada Core Equity Fund
Class A 17.69% 20.58% 08/01/97
Class B 21.18% 23.38% 01/06/98
Class I N/A 20.82% 8/01/97
Armada Equity Index
Class A 24.93% 29.20% 10/15/98
Class B N/A N/A N/A
Class I N/A 15.46% 7/10/98
Armada Equity Income Fund
Class A 13.85% 15.09% 08/22/94
Class B 2.94% 5.47% 01/06/98
Class I N/A 15.49% 7/01/94
Armada Balanced Allocation Fund
Class A 8.11% 12.17% 07/31/98
Class B 9.52% 14.24% 11/11/98
Class I N/A 9.76% 7/10/98
Armada Total Return Advantage Fund
Class A 5.52% 6.51% 09/06/94
Class B** -3.31% 1.69% 8/11/99
Class I N/A 6.92% 7/07/94
Armada Bond Fund
Class A 6.70% 7.17% 10/31/88
Class B 4.36% 4.36% 02/04/96
Class I N/A 7.36% 10/31/88
Armada Intermediate Bond Fund
Class A 5.74% 6.34% 04/15/91
Class B 0.09% 2.58% 01/06/98
Class I N/A 7.00% 12/20/89
Armada GNMA Fund
Class A 4.78% 6.37% 09/11/96
Class B** -2.09% 2.91% 08/11/99
Class I N/A 7.02% 8/10/84
Armada Limited Maturity Bond Fund
Class A 5.13% 5.70% 09/09/94
Class B** -3.51% 1.49% 08/16/99
Class I N/A 5.73% 7/7/94
</TABLE>
-115-
<PAGE> 160
<TABLE>
<CAPTION>
Annualized Total Return
Annualized Total Return From Inception Through
From Inception Through 11/30/99 (without
11/30/99 (with Deduction of Deduction for
Maximum Sales Charge) Any Sales Charge) Inception Date
--------------------- ----------------- --------------
<S> <C> <C> <C>
Armada Ohio Tax Exempt Bond Fund
Class A 5.04% 5.40% 04/15/91
Class B N/A N/A N/A
Class I N/A 5.41% 1/5/90
Armada Pennsylvania Municipal Bond Fund
Class A
Class B 3.52% 4.49% 09/11/96
Class I N/A N/A N/A
N/A 4.67% 8/10/94
Armada National Tax Exempt Bond
Fund*
Class A
Class B 6.41% 6.74% 6/22/98
Class I 6.70% 6.70% 01/28/99
N/A 6.75% 4/9/98
Armada Mid Cap Growth Fund
Class A 14.75% 15.33% 10/31/88
Class B 14.25% 14.25% 2/4/94
Class I N/A 15.41% 10/31/98
Armada Large Cap Ultra Fund
Class A 26.15% 28.03% 2/01/96
Class B 26.71% 27.11% 2/01/96
Class I N/A 28.65% 12/28/95
Armada U.S. Government Income Fund
Class A
Class B 5.01% 5.74% 11/12/92
Class I 4.76% 4.76% 2/04/94
N/A 5.95% 11/12/92
Armada Michigan Municipal Bond Fund
Class A
Class B 4.99% 5.53% 7/2/90
Class I 3.02% 3.02% 2/04/94
N/A 5.71% 7/2/90
* Includes the history of a predecessor common trust fund which commenced
operations July 31, 1984.
** Share class has been in operation for less than one year. Performance quoted
is cumulative since inception.
</TABLE>
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<PAGE> 161
PERFORMANCE REPORTING
From time to time, in advertisements or in reports to
shareholders, the performance of the Funds may be quoted and compared to that
of other mutual funds with similar investment objectives and to stock or other
relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual
funds. For example, the performance of the Funds may be compared to data
prepared by Lipper Analytical Services, Inc., a widely recognized independent
service which monitors the performance of mutual funds. The performance of the
Balanced Allocation Fund and the Equity Funds may also be compared to data
prepared by the S&P 500 Index, an unmanaged index of groups of common stocks,
the Consumer Price Index, or the Dow Jones Industrial Average, a recognized
unmanaged index of common stocks of 30 industrial companies listed on the New
York Stock Exchange. In addition, the performance of the International Equity
Fund may be compared to the Morgan Stanley Capital International Index or the
FT World Actuaries Index.
Performance data as reported in national financial
publications including, but not limited to, Money Magazine, Forbes, Barron's,
The Wall Street Journal and The New York Times, or publications of a local or
regional nature may also be used in comparing the performance of the Funds. The
Money Market Funds may also be compared to the average yields reported by the
Bank Rate Monitor for money market deposit accounts offered by the 50 leading
banks and thrift institutions in the top five standard metropolitan statistical
areas.
Performance data will be calculated separately for each class
of shares of the Funds.
The performance of the Funds will fluctuate and any quotation
of performance should not be considered as representative of the future
performance of the Funds. Since yields fluctuate, yield data cannot necessarily
be used to compare an investment in a Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed or
guaranteed fixed yield for a stated period of time. Shareholders should
remember that performance data are generally functions of the kind and quality
of the instruments held in a portfolio, portfolio maturity, operating expenses,
and market conditions. Any additional fees charged by institutions with respect
to accounts of customers that have invested in shares of a Fund will not be
included in performance calculations.
The portfolio managers of the Funds and other investment
professionals may from time to time discuss in advertising, sales literature or
other material, including periodic publications, various topics of interest to
shareholders and prospective investors. The topics may include but are not
limited to the advantages and disadvantages of investing in tax-deferred and
taxable investments; Fund performance and how such performance may compare to
various market indices; shareholder profiles and hypothetical investor
scenarios; the economy; the financial and capital markets; investment
strategies and techniques; investment products; and tax, retirement and
investment planning.
-117-
<PAGE> 162
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 Money Market 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 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 June 14, 2000, the following persons owned of record 5
percent or more of the shares of the Funds of the Trust:
<TABLE>
<CAPTION>
NAME AND ADDRESS OUTSTANDING SHARES PERCENTAGE OF FUND
SHARES OWNED
INTERNATIONAL EQUITY FUND
(CLASS C SHARES)
<S> <C> <C>
First Clearing Corporation 1,141.8370 8.70%
A/C 8327-1306
Janyce K White SEP IRA
FCC as Custodian
P.O. Box 831
Logansport, IN 46947-0831
First Clearing Corporation 2,774.0320 21.14%
A/C 2125-0724
Keven Crawford IRA
FCC as Custodian
1111 E. St. Rd 14
Winamac, IN 46996
First Clearing Corporation 692.6090 5.28%
A/C 1147-1851
Michael C. Anderson
4301 East Market
P.O. Box 179
Logansport, IN 46947-1079
</TABLE>
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<PAGE> 163
<TABLE>
<S> <C> <C>
First Clearing Corporation 848.9520 6.47%
A/C 7081-0852
Ridgeway Community Nurses Srvcs
ATTN: Lori MacDonald
20 North Broad Street
Ridgway, PA 15853-1002
First Clearing Corporation 1,360.5290 10.37%
A/C 8645-8446
Ronald W. Watt
127 Public Sq #5200
Cleveland, OH 44114-1216
First Clearing Corporation 1,259.5110 9.60%
A/C 4824-4290
John P. Klingbeil &
Georgann Klingbeil
86924 Westwood Lane
Olmsted Falls, OH 44138-1159
First Clearing Corporation 1,196.3010 9.11%
A/C 6604-3812
Janet M. Reed IRA
FCC as Custodian
330 Haney Avenue
Logansport, IN 46947-2118
First Clearing Corporation 1,261.1050 9.61%
A/C 1294-3972
Robert Henry Baker Jr IRA
FCC as Custodian
834 Georgiana St
Port Angeles, WA 98362-3512
First Clearing Corporation 1,066.5620 8.13%
A/C 2144-8605
Thomas L. Curry JR IRA R/O
FCC as Custodian
20571 Ellacott Pkwy #527
Cleveland, OH 44128-4457
<CAPTION>
INTERNATIONAL EQUITY FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
Sheldon & Co. (Reinv) 2,514,985.0340 5.15%
Attn: Trust Mutual Funds
Account #100023342
P.O. Box 94777
Cleveland, OH 44101-4777
</TABLE>
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<PAGE> 164
<TABLE>
<S> <C> <C>
Sheldon & Co. TTEE 11,022,029.4490 22.54%
C/o National City Bank
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 14,303,292.8960 29.30%
C/o Sheldon & Co.
P.O. Box 94777
Cleveland, OH 44101-4777
National City Bank 11,982,639.1620 24.54%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 6,755,230.1090 13.84%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
<CAPTION>
LARGE CAP ULTRA FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
Bisys BD Services, Inc. 59,915.0390 5.59%
P.O. Box 4054
Concord, CA 94524-4054
Soy Capital AG Services & Trust Co 87,288.1650 8.15%
455 N. Main Street
Decatur, IL 62523-1103
<CAPTION>
LARGE CAP ULTRA FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 7,060,132.0740 51.50%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 6,050,065.5510 44.13%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
<CAPTION>
MID CAP GROWTH FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
National City Bank 12,294,372.1680 70.14%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
</TABLE>
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<PAGE> 165
<TABLE>
<S> <C> <C>
National City Bank 4,617,063.3470 26.34%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
<CAPTION>
TAX MANAGED EQUITY OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
First Clearing Corporation 67,470.7440 5.61%
A/C 2403-5876
Cathleen A. Conry
PO Box 567
Aurora, OH 44202-0567
NFSC FEBO #Z41-257923 79,923.4880 6.65%
Allison P. Vanhartesveldt
3141 N. Quincy St.
Arlington, VA 22207-4144
<CAPTION>
TAX MANAGED EQUITY FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
<S> <C> <C>
First Clearing Corporation 3,925.7670 11.70%
A/C 2809-5755
Florence Dixon
P.O. Box 119
Cooksburg, PA 16217-0119
First Clearing Corporation 5,763.6890 17.18%
A/C 8650-9893
Maryla F. White
1313 Lance Drive
Louisville, KY 40216-3930
First Clearing Corporation 1,770.5380 5.28%
A/C 3762-1128
Richard L. Gump &
Marla K. Gump
4718 Dennison Avenue
Cleveland, OH 44102-6019
First Clearing Corporation 2,932.5510 8.74%
A/C 3281-7977
Edward Folkman
Carol Folkman
7897 Oakhurst Drive
Brecksville, OH 44141-1123
</TABLE>
-121-
<PAGE> 166
<TABLE>
<S> <C> <C>
First Clearing Corporation 3,199.8580 9.54%
A/C 3204-6205
Anna I. Fierle
Margaret M. Meder
6513 Dennison Blvd.
Parma Heights, OH 44130-4104
First Clearing Corporation 7,331.3780 21.85%
A/C 6108-1699
Kenneth A. Otto
Merilee W. Otto
1710 Rood Point Road
Muskegon, MI 49441-4849
First Clearing Corporation 2,795.2480 8.33%
A/C 6960-1719
Piertro Ragone Trust
Domenico Ragone TTEE
3321 Friar Drive
Parma, OH 44134-5518
<CAPTION>
TAX MANAGED EQUITY FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
Sheldon & Co TTEE 9,244,695.4650 51.32%
C/O National City Bank
Trust Mutual Fds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 8,364,353.8430 46.43%
C/O National City Bank
P.O. Box 94777
ATTN: Trust Mutual Funds
Cleveland, OH 44101-4777
<CAPTION>
CORE EQUITY FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS B SHARES) SHARES OWNED
<S> <C> <C>
First Clearing Corporation 6,793.4780 5.40%
A/C 8406-2776
Trionix Research Lab Inc.
8037 Bavaria Road
Twinsburg, OH 44087-2261
<CAPTION>
CORE EQUITY FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
Bill Bartley 131.7490 73.86%
476 Baldwin Heights Cir
Howard, OH 43028-9505
</TABLE>
-122-
<PAGE> 167
<TABLE>
<S> <C> <C>
SEI Trust Company CUST 39.7880 22.30%
Roth Contribution IRA
Kathleen O'Connor
1365 Clarence Avenue #101
Lakewood, OH 44107-2862
<CAPTION>
CORE EQUITY FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
Sheldon & Co. TTEE 570,702.7070 6.02%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
C/O National City Bank 8,660,849.1420 91.30%
Shelden & Co.
Trust Mutual Funds
PO Box 94777
Cleveland, OH 44101-4777
<CAPTION>
SMALL CAP VALUE FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS B SHARES) SHARES OWNED
<S> <C> <C>
First Clearing Corporation 2,918.6850 5.73%
A/C 5072-0540
Judith E. Lewis IRA R/O
FCC as Custodian
1800 W. Wallings Road
Broadview Hts., OH 44147-1137
<CAPTION>
SMALL CAP VALUE FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
<S> <C> <C>
First Clearing Corporation 949.3690 20.42%
A/C 7081-0852
Ridgway Community Nurses Srvcs
ATTN: Lori MacDonald
20 North Broad Street
Ridgway, PA 15853-1002
First Clearing Corporation 1,282.8840 27.59%
A/C 4089-7903
Hart Road Pathology SC PS
FBO Dr. James Larson
1205 Main St
Cross Plains, WI 53528-9479
</TABLE>
-123-
<PAGE> 168
<TABLE>
<S> <C> <C>
First Clearing Corporation 762.5910 16.40%
A/C 4089-7905
Hart Road Pathology SC PS
FBO Dr. James Larson
1205 Main St
Cross Plains, WI 53528-9479
First Clearing Corporation 1,647.2200 35.43%
A/C 6490-8961
Homer M. Osborne IRA
FCC as Custodian
5 Patricia St.
Charleroi, PA 15022-9439
<CAPTION>
SMALL CAP VALUE FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
Sheldon & Co. (Reinv) 12,968,053.2900 54.41%
Attn: Trust Mutual Funds
Account #100023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 7,287,425.4700 30.58%
P.O. Box 94984
ATTN: Trust Mutual Funds
Cleveland, OH 44101-4984
Sheldon & Co. (Cash/Reinv) 2,335,202.7210 9.80%
C/o National City Bank
ATTN: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4984
<CAPTION>
SMALL CAP GROWTH FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
<S> <C> <C>
First Clearing Corporation 1,209.3140 21.09%
A/C 7081-0852
Ridgeway Community Nurses Srvcs
ATTN: Lori MacDonald
20 North Broad Street
Ridgway, PA 15853-1002
First Clearing Corporation 643.8910 11.23%
A/C 7194-4927
Wayne A. Ruhlman IRA R/O
FCC as Custodian
4376 Porter Road
North Olmsted, OH 44070-2520
</TABLE>
-124-
<PAGE> 169
<TABLE>
<S> <C> <C>
First Clearing Corporation 1,311.1030 22.86%
A/C 4089-7903
Hart Road Pathology SC PS
FBO Dr. James Larson
1205 Main Street
Cross Plains, WI 53528-9479
First Clearing Corporation 780.1900 13.61%
A/C 4089-7905
Hart Road Pathology SC PS
FBO Dr. James Larson
1205 Main Street
Cross Plains, WI 53528-9479
First Clearing Corporation 1,270.6570 22.16%
A/C 1294-3972
Robert Henry Baker Jr IRA
FCC as Custodian
834 Georgiana St
Port Angeles, WA 98362-3512
<CAPTION>
SMALL CAP GROWTH FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 9,820,550.4030 40.42%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 2,854,669.2670 11.75%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. TTEE 4,975,247.5620 20.48%
c/o National City Bank
Trust Mutual FDS
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 4,481,866.6640 18.45%
c/o Sheldon & Co
Trust Mutual FDS
P.O. Box 94777
Cleveland, OH 44101-4777
</TABLE>
-125-
<PAGE> 170
<TABLE>
<CAPTION>
EQUITY INCOME FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
<S> <C> <C>
Sei Trust Company 2,488.0120 36.68%
Cust for the Rollover IRA of
Wallace Strickland
3337 E. 149th St
Cleveland, OH 44128
First Clearing Corporation 2,353.3150 34.69%
A/C 7081-0852
Ridgway Community Nurses Srvcs
ATTN: Lori MacDonald
20 North Broad Street
Ridgway, PA 15853-1002
First Clearing Corporation 625.5970 9.22%
A/C 4858-4008
Mary S. Kowtun IRA
FCC as Custodian
6417 Rousseau Dr
Parma, OH 44129-6306
First Clearing Corporation 974.8500 14.37%
A/C 7194-4927
Wayne A. Ruhlman IRA
R/O FCC as Custodian
4376 Porter Road
North Olmsted, OH 44070-2520
<CAPTION>
EQUITY INCOME FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 2,491,118.8980 5.77%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 7,246,095.7260 16.79%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. (Reinv) 9,877,906.8000 22.88%
Attn: Trust Mutual Funds
Account #1023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 6,555,187.4560 15.18%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. (Cash/Reinv) 13,425,318.5710 31.10%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
</TABLE>
-126-
<PAGE> 171
<TABLE>
<CAPTION>
EQUITY INDEX FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
First Clearing Corporation 44,011.4930 6.51%
A/C 6956-888
Dr. Frank Radosevich IRA
FCC as Custodian
5632 N. Isabell
Peoria, IL 61614-4135
<CAPTION>
EQUITY INDEX FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS B SHARES) SHARES OWNED
<S> <C> <C>
S & H Machine Product Inc. PSP 4,666.4530 10.86%
Stanimir M. Vitkovic
6180 West Smith Road
Medina, OH 44256-8949
First Clearing Corporation 2,686.8680 6.25%
A/C 3878-8265
Donald K. Hansen SEP IRA
FCC as Custodian
1853 Newbury Ct.
Westlake, OH 44145-3331
First Clearing Corporation 8,068.6750 18.77%
A/C 8406-2776
Trionix Research Lab Inc
8037 Bavaria Road
Twinsburg, OH 44087-2261
First Clearing Corporation 3,970.3510 9.24%
A/C 1202-4114
Eugene Arrigoni IRA
FCC as Custodian
4101 Grady Smith Road
Loganville, GA 30052-3650
First Clearing Corporation 4,029.0090 9.37%
A/C 5236-4538
James T. Lange IRA R/O
FCC as Custodian
5197 E. Farnhurst
Lyndhurst, OH 44124-1237
<CAPTION>
EQUITY INDEX FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
<S> <C> <C>
First Clearing Corporation 1,587.3800 6.99%
A/C 2013-6872
Dominador T. Chan
28643 Estates Court
Solon, OH 44139-1164
</TABLE>
-127-
<PAGE> 172
<TABLE>
<S> <C> <C>
First Clearing Corporation 7,993.9530 35.21%
A/C 5911-3463
Lyman F. Narten IRA R/O
FCC as Custodian
15155 Heritage Lane
Chagrin Falls, OH 44022-2674
First Clearing Corporation 3,303.1120 14.55%
A/C 8645-8446
Ronald W. Watt
127 Public Sq #5200
Cleveland, OH 44114-1216
First Clearing Corporation 1,536.0980 6.77%
A/C 6785-6053
John Potochick
10889 Gordon Drive
Parma, OH 44130-5142
First Clearing Corporation 2,660.0170 11.72%
A/C 6835-6607
Betty J. Powers IRA R/O
FCC as Custodian
9838 Burton Dr.
Twinsburg, OH 44087-3206
First Clearing Corporation 1,636.6610 7.21%
A/C 2763-4662
Kayle J. Depoy IRA
FCC as Custodian
1168 Forest Park Road
Muskegon, MI 49441-4637
<CAPTION>
EQUITY INDEX FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
Sheldon & Co. (Reinv) 23,067,096.0470 79.65%
Attn: Trust Mutual Funds
Account #1023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 2,018,055.4070 6.97%
C/O National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
</TABLE>
-128-
<PAGE> 173
<TABLE>
<S> <C> <C>
Sheldon & Co. (Cash/Reinv) 2,973,458.6290 10.27%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
BALANCED ALLOCATION FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
<S> <C> <C>
SEI Trust Company 115.9370 37.06%
Cust for the IRA of
FBO Karen Sherer
2113 Wilkes Way
Lexington, KY 40505-4847
SEI Trust Company Cust 187.2820 59.87%
Roth Contribution IRA
Thomas D. Keller
14422 Orchard Park Avenue
Cleveland, OH 44111-2115
<CAPTION>
BALANCED ALLOCATION FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 11,399,574.8050 60.07%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. (Reinv) 6,626,254.2190 34.92%
Attn: Trust Mutual Funds
Account #10023342
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
Soy Capital AG Services & Trust Co 450,185.9280 30.73%
455 N Main St
Decatur IL 62523-1103
<CAPTION>
BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
<S> <C> <C>
First Clearing Corporation 4,319.6190 99.75%
A/C 7081-0852
Ridgway Community Nurses Srvcs
ATTN: Lori MacDonald
20 North Broad Street
Ridgway, PA 15853-1002
</TABLE>
-129-
<PAGE> 174
<TABLE>
<CAPTION>
BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 21,445,213.3880 22.10%
ATTN Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 9,623,188.8040 9.92%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
C/O National City Bank 8,183,090.6550 8.43%
Sheldon & Co
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 20,597,648.3780 21.23%
P.O. Box 94984
Attn: Trust Mutual Funds
Cleveland, OH 44101-4984
Sheldon & Co. (Cash/Reinv) 36,152,184.7460 37.26%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
</TABLE>
-130-
<PAGE> 175
<TABLE>
<CAPTION>
GNMA FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
Post & Co A/C 356678 12,334.2530 9.75%
C/O The Bank of New York
ATTN: Mutual Funds/Reorg Dept
P.O. Box 1066 Wall St Sta
New York, NY 10286
Schweizer Dipple Inc 401K Plan 9,288.6610 7.34%
Dennis J Clark, Sr.
ATTN; Lynn E. Ulrich
Personal and Confidential
7227 Division Street
Oakwood Village, OH 44146-5405
<CAPTION>
GNMA FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS B SHARES) SHARES OWNED
Shore West Construction 401(k) Plan 2,091.1430 12.65%
Kenneth M. Sokol
Attn: Barbara Beyer
Personal and Confidential
23826 Lorain Rd
North Olmsted, OH 44070-2226
Shore West Construction 401(k) Plan 1,687.4760 10.21%
Audrey M. Sokol
Attn: Barbara Byer
Personal and Confidential
23826 Lorain Rd
North Olmsted, OH 44070-2226
First Clearing Corporation 4,130.6750 24.99%
A/C 6379-0631
Jane Obodzinski
1205 Brookpark Raod
Cleveland, OH 44109-5827
First Clearing Corporation 1,037.1070 6.27%
A/C 2054-0408
Clifton Christian Church
ATTN: Elliott Morris
131 Vernon Avenue
Louisville, KY 40206-2036
First Clearing Corporation 2,032.9730 12.30%
A/C 3204-6207
Anne I Fierle
Margaret M. Meder
6513 Dennison Blvd.
Parma Heights, OH 44130-4104
</TABLE>
-131-
<PAGE> 176
<TABLE>
<S> <C> <C>
First Clearing Corporation 1,552.4170 9.39%
A/C 4176-6737
Doris J Hoel IRA
FCC as Custodian
13646 Crestway Dr.
Brookpark, OH 44142-2656
First Clearing Corporation 1,099.2360 6.65%
A/C 7782-3187
Robert L Scarbro IRA R/O
FCC as Custodian
4763 Brookhigh Dr
Brooklyn, OH 44144-3158
First Clearing Corporation 2,593.3300 15.69%
A/C 4220-6879
Emily Lucy Holowaty
Grace C Mazur POA
13527 Byron Blvd
Cleveland, OH 44130-7112
<CAPTION>
GNMA FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
<S> <C> <C>
First Clearing Corporation 1,855.8880 21.57%
A/C 7081-0852
Ridgway Community Nurses Srvcs
ATTN: Lori MacDonald
20 North Broad Street
Ridgway, PA 15853-1002
First Clearing Corporation 4,718.0280 54.83%
A/C 3204-6205
Anna I Fierle
Margaret M Meder
6513 Dennison Blvd
Parma Heights, OH 44130-4104
First Clearing Corporation 991.3150 11.52%
A/C 8763-2694
Stanley Woo SEP IRA
FCC as Custodian
3448 W 99th St
Cleveland, OH 44102-4614
First Clearing Corporation 1,028.7590 11.96%
A/C 4568-3896
Robert A Joyce IRA
FCC as Custodian
4709 Wetzel Avenue
Cleveland, OH 44109-5351
</TABLE>
-132-
<PAGE> 177
<TABLE>
<CAPTION>
GNMA FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
C/o National City Bank 1,136,298.4430 9.22%
Sheldon & Co.
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 8,697,660.1650 70.55%
C/O National City Bank
Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 2,415,544.4200 19.59%
C/O Sheldon & Co.
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
INTERMEDIATE BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
Soy Capital AG Services & Trust Co. 170,886.7520 14.87%
455 N. Main Street
Decatur, IL 62523-1103
<CAPTION>
INTERMEDIATE BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
<S> <C> <C>
SEI Trust Company 3,892.4830 20.21%
Cust for the Rollover IRA of
Wallace Strickland
3337 E 149th Street
Cleveland, OH 44128
First Clearing Corporation 15,357.5030 79.74%
A/C 1294-3972
Robert Henry Baker Jr IRA
FCC as Custodian
834 Georgiana St
Port Angeles, WA 98362-3512
<CAPTION>
INTERMEDIATE BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 5,590,433.0990 15.10%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
</TABLE>
-133-
<PAGE> 178
<TABLE>
<S> <C> <C>
Sheldon & Co. (Reinv) 4,176,117.3750 11.28%
Attn: Trust Mutual Funds
Account #10023342
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. 8,302,716.4310 22.43%
P.O. Box 94984
Attn: Trust Mutual Funds
Cleveland, OH 44101-4984
Sheldon & Co. 12,290,775.1580 33.20%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
SEI Trust Company 4,665,919.0320 12.60%
Attn: Mutual Fund Administrator
One Freedom Valley Drive
Oaks, PA 19456
<CAPTION>
LIMITED MATURITY BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
Soy Capital AG Services & Trust Co. 208,281.2210 21.09%
455 N. Main Street
Decatur, IL 62523-1103
Bisys BD Services, Inc. 155,269.3960 15.72%
P.O. Box 4054
Concord, CA 94524-4054
<CAPTION>
LIMITED MATURITY BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS B SHARES) SHARES OWNED
<S> <C> <C>
Shore West Construction 401(k) Plan 4,356.7040 5.69%
Gary Scothon
Attn: Barbara Beyer
Personal and Confidential
23826 Lorain Rd
North Olmsted, OH 44070-2226
First Clearing Corporation 4,300.5390 5.62%
A/C 4753-9962
Larry D. Kiefer IRA R/O
FCC as Custodian
RR 2 Box 118
Gridley, IL 61744-9304
</TABLE>
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<PAGE> 179
<TABLE>
<S> <C> <C>
First Clearing Corporation 4,143.3770 5.41%
A/C 6379-0631
Jane F. Obodzinski
1205 Brookpark Road
Cleveland, OH 44109-5827
First Clearing Corporation 3,960.7070 5.17%
A/C 4296-9582
C Edward Howerton
4721 Willowbrook Lane
Decatur, IL 62521-4266
First Clearing Corporation 4,224.0730 5.52%
A/C 6309-4604
Marianne Peterson
957 St. John
Lincoln Park, MI 48146
First Clearing Corporation 3,953.3010 5.16%
A/C 8016-4073
Martha Fajardo Vaca Cust For
Ernesto Vaca Jr
1271 Northwestern Ave
Gurnee, IL 60031-2364
<CAPTION>
LIMITED MATURITY BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
<S> <C> <C>
First Clearing Corporation 1,830.7320 99.44%
A/C 7081-0852
Ridgway Community Nurses Svcs
Attn: Lori MacDonald
20 North Broad Street
Ridgway, PA 15853-1002
<CAPTION>
LIMITED MATURITY BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 3,422,764.3300 17.14%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 6,796,548.5690 34.03%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
</TABLE>
-135-
<PAGE> 180
<TABLE>
<S> <C> <C>
Sheldon & Co. (Reinv) 5,037,961.6680 25.23%
Future Quest
c/o National City Bank
Attn: Trust Mutual Funds/01-999999774
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 3,363,957.5800 16.84%
Future Quest
c/o National City Bank
Attn: Trust Mutual Funds/01-999999774
P.O. Box 94984
Cleveland, OH 44101-4984
<CAPTION>
TOTAL RETURN ADVANTAGE FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
Fifth Third Bank TTEE 207,736.6560 39.06%
FBO IBEW 688 RET SA NAMCO
5/3 a/C # 52-52-002-7034614
P.O. Box 630074
Cincinnati, OH 45263-0001
Fifth Third Bank TTEE 219,128.9190 41.20%
FBO IBEW 688 Pension NAMCO
5/3 A/C #52-52-002-7034515
P.O. Box 630074
Cincinnati, OH 45263-0001
<CAPTION>
TOTAL RETURN ADVANTAGE FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS B SHARES) SHARES OWNED
<S> <C> <C>
SEI Investments Co. 10.7710 16.10%
Attn: Rob Silverstri
One Freedom Valley Drive
Oaks, PA 19456
Audit National City 401(k) 13.1910 19.71%
National City Participant
P.O. Box 8431
Boston, MA 02266-8431
Lee Williams Meats Inc. 401 (K) Plan 13.0560 19.51%
Joseph C Mossing
2410 Lehman
Toledo, OH 43611-2920
Lee Williams Meats Inc. 401 (K) Plan 8.4380 12.61%
Michael B Bailey
506 Arden
Toledo, OH 43605-2316
</TABLE>
-136-
<PAGE> 181
<TABLE>
<S> <C> <C>
Lee Williams Meats Inc. 401 (K) Plan 21.4560 32.07%
Carla J Koch
3232 East Manhatten Blvd.
Toledo, OH 43611-1715
<CAPTION>
TOTAL RETURN ADVANTAGE FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
<S> <C> <C>
SEI Investments Co 10.6160 100%
Attn: Rob Silverstri
One Freedom Valley Drive
Oaks, PA 19456
<CAPTION>
TOTAL RETURN ADVANTAGE FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
Sheldon & Co. (Reinv) 17,837,903.2580 51.09%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. 8,169,812.4370 23.40%
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 5,768,964.5820 16.52%
c/o National City Bank
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
<CAPTION>
U.S. GOVERNMENT INCOME FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
Soy Capital AG Services & Trust Co 522,564.3820 22.55%
455 N. Main Street
Decatur, IL 62523-1103
Bisys BD Services, Inc. 134,465.3290 5.80%
P.O. Box 4054
Concord, CA 94524-4054
<CAPTION>
U.S. GOVERNMENT INCOME FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
</TABLE>
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<PAGE> 182
<TABLE>
<S> <C> <C>
National City Bank 2,498,303.2850 16.45%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 12,322,664.7800 81.14%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
<CAPTION>
MICHIGAN MUNICIPAL BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS B SHARES) SHARES OWNED
<S> <C> <C>
First Clearing Corporation 15,204.6940 8.40%
A/C 1474-8811
Marion E. Belloni
27715 Alger Lane
Madison Heights, MI 48071-4523
First Clearing Corporation 9,825.4220 5.43%
A/C 6338-8396
Betty May Nicholas
866 Dursley
Bloomfield, MI 48304-2010
First Clearing Corporation 11,173.2280 6.17%
A/C 7645-7001
William G. Swain
2075 Kingston
White Lake, MI 48386-1616
First Clearing Corporation 9,496.6760 5.24%
A/C 8304-7634
Emily T. Wheeler TTEE
Emily T. Wheeler Trust
1632 Tawas Beach Road
East Tawas, MI 48730-9330
First Clearing Corporation 9,155.7770 5.06%
A/C 6852-6451
Marylee A. Roven &
Sheryl C Roven
13644 Wesley
Southgate, MI 48195-1719
<CAPTION>
MICHIGAN MUNICIPAL BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
</TABLE>
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<PAGE> 183
<TABLE>
<S> <C> <C>
National City Bank 1,665,799.9650 11.09%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 13,210,082.8260 87.91%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
<CAPTION>
NATIONAL TAX EXEMPT BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
Soy Capital AG Services & Trust Co 87,606.2410 11.37%
455 N Main Street
Decatur, IL 62523-1103
First Clearing Corporation 352,023.9800 45.67%
A/C 1143-7442
Bill Anest
400 S. Curran
Grayslake, IL 60030-9784
<CAPTION>
NATIONAL TAX EXEMPT BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS B SHARES) SHARES OWNED
Donaldson Lufkin Jenrette 5,966.1940 8.86%
Securities Corporation Inc.
P. O. Box 2052
Jersey City, NJ 07303-2052
NFSC FEBO #WHL -000396 12,584.9330 18.69%
Betty J Bowen
2400 Country Club Dr
Springfield, IL 62704-3262
Harlan Hawkins & 13,420.2570 19.93%
Mark Hawkins TTEE
U/A DTD May 21, 1992
Cecil C Hawkins Trust
4412 George Ave
Cortland IL 60112
First Clearing Corporation 4,617.8700 6.86%
A/C 2099-9089
James E. Chenault &
Judith E. Chenault
8609 Cool Brook Ct.
Louisville, KY 40291-1501
</TABLE>
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<PAGE> 184
<TABLE>
<S> <C> <C>
First Clearing Corporation 5,176.2600 7.69%
A/C 5482-0768
Theodore R. McDonald &
Rose Ann McDonald
7712 St. Bernard Ct.
Louisville, KY 40291-2462
First Clearing Corporation 7,279.5490 10.81%
A/C 7309-7317
Howard B. Smith, Jr.
545 Country Manor Lane
Shepherdsville, KY 40165-9543
<CAPTION>
NATIONAL TAX EXEMPT BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
<S> <C> <C>
SEI Investments Co 10.5350 100.0%
ATTN Rob Silvestri
One Freedom Valley Drive
Oaks, PA 19456
<CAPTION>
NATIONAL TAX EXEMPT BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 5,927,786.5390 35.87%
Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. TTEE 7,681,892.4240 46.49%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
National City Bank 2,017,202.1240 12.21%
c/o Sheldon & Co.
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
OHIO TAX EXEMPT BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
Evern Securities C/O BNY Clearing Services 28,219.4520 5.77%
Cust FBO
FFC Ellen Stirm MAVEC S/D IRA UA
A/C OL58-4485-3981
111 E. Kilbourn Ave
Milwaukee, WI 53202-6611
</TABLE>
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<PAGE> 185
<TABLE>
<S> <C> <C>
First Clearing Corporation 97,721.5960 19.99%
A/C 1528-5380
David J. Beverly &
Pamela C. Beverly
1128 Laguna Drive
Huron, OH 44839-2605
First Clearing Corporation 51,410.1760 10.52%
A/C 1750-2503
Edward B. Brandon &
Phyllis P. Brandon JTWROS
Lakepoint Office Park Ste. 470
3201 Enterprise Pkwy.
<CAPTION>
OHIO TAX EXEMPT BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
<S> <C> <C>
SEI Investments Co 9.5240 100.0%
ATTN Rob Silvestri
One Freedom Valley Drive
Oaks, PA 19456
<CAPTION>
OHIO TAX EXEMPT BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
Sheldon and Co. (Cash) 13,601,759.2290 86.56%
National City Bank
Trust Mutual Funds - 5312
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon and Co. (Cash/Reinv) 1,592,441.0710 10.13%
National City Bank
Trust Mutual Funds-5312
P.O. Box 94777
Cleveland, OH 44101-4777
</TABLE>
-141-
<PAGE> 186
<TABLE>
<CAPTION>
PENNSYLVANIA MUNICIPAL BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
National Financial Services Corp 5,113.0560 19.01%
FBO Gary S Lengel
Bin #TGA 100897
200 Liberty St #FL
New York, NY 10281-1003
First Clearing Corporation 10,185.0380 37.86%
FBO Sara Zimmer
ACCT # 8963-5901
PO Box 1357
Richmond, VA 23218-1357
First Clearing Corporation 8,587.1490 31.92%
A/C 7618-3716
Helga A. Suhr
304 Michigan Avenue
Lower Burrell, PA 15068-2936
First Clearing Corporation 2,287.2830 8.50%
A/C 4267-7452
John M. Hankey
2430 Renton Road
Pittsburgh, PA 15239-1227
<CAPTION>
PENNSYLVANIA MUNICIPAL BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS B SHARES) SHARES OWNED
<S> <C> <C>
SEI Investments Co 10.0900 100.0%
ATTN Rob Silvestri
One Freedom Valley Drive
Oaks, PA 19456
<CAPTION>
PENNSYLVANIA MUNICIPAL BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
Sheldon and Co. 4,249,890.7720 94.57%
P.O. Box 94984
ATTN: Trust Mutual Funds
Cleveland, OH 44101-4984
<CAPTION>
TAX EXEMPT MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
</TABLE>
-142-
<PAGE> 187
<TABLE>
<S> <C> <C>
National City MI/IL 18,815,000.000 9.13%
FBO Corporate PCG/Retail Sweep Cust
Cash Management Operations
770 W. Broad Street LOC 16-0347
Columbus, OH 43222-1419
First Clearing Corporation 101,746,715.2500 49.35%
P.O. Box 6629
Glen Allen, VA 23058-6629
Indiana 13,267,569.1400 6.43%
National City Bank of Indiana
FBO PCG/Retail Sweep Customers
Cash Management Operations
770 W. Broad St. LOC. 16-0347
Columbus, OH 43222-1419
National City Bank 11,426,000.000 5.54%
FBO PCG/Retail Sweep Customers
770 W. Broad Street, Location 16-0347
Columbus, OH 43222-1419
National City Bank 38,221,100.6900 18.54%
FBO PCG/Retail Sweep Customers
770 W. Broad Street, Location 16-0347
Columbus, OH 43222-1419
<CAPTION>
TAX EXEMPT MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 52,526,510.1200 12.35%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 102,699,801.1300 24.15%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 25,266,989.1900 5.94%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
</TABLE>
-143-
<PAGE> 188
<TABLE>
<S> <C> <C>
National City Bank 35,705,980.1500 8.40%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 50,317,203.1100 11.83%
Operations Center
ATTN: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 91,578,945.7700 21.54%
Money Market Unit/Loc. 5312
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 33,110,645.2700 7.79%
Trust Operations
Operations Center
3rd floor North Annex
4100 W 150th Street
Cleveland, OH 44135-1389
<CAPTION>
MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
National City MI/IL 104,427,000.000 6.29%
FBO Corporate Sweep Customer
Cash Management Operations
770 W. Broad Street Loc. 16-0347
Columbus, OH 43222-1419
Pennsylvania 347,259,000.0000 20.93%
FBO Corporate Autosweep Customers
C/o National Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15222-2003
Wheat First Securities 729,836,106.0800 44.00%
P.O. Box 6629
Glen Allen, VA 23058-6629
National City Bank 246,888,000.000 44.00%
FBO PCG/Retail Sweep Customer
770 W. Broad St. Location 16-0347
Columbus, OH 43222-1419
</TABLE>
-144-
<PAGE> 189
<TABLE>
<S> <C> <C>
National City Bank 85,242,407.9600 5.14%
FBO PCG/Retail Sweep Customer
770 W. Broad Street LOC 16-0347
Columbus, OH 43222-1419
<CAPTION>
MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS B SHARES) SHARES OWNED
<S> <C> <C>
First Clearing Corporation 56,293.6900 11.08%
A/C 7335-5550
Roger L. Schafer IRA
FCC as Custodian
3945 7th Street
New Kensington, PA 15068-7205
S&H Machine Products, Inc. 37,202.9500 7.33%
Stanimir M. Vitkovic
6180 West Smith Road
Medina, OH 44256-8949
First Clearing Corporation 26,753.5300 5.27%
A/C 4505-9511
John M. Jervis
301 W. Beardsley
Champaign, IL 61820-2927
</TABLE>
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<PAGE> 190
<TABLE>
<S> <C> <C>
First Clearing Corporation 89,721.0000 17.67%
A/C 2065-0386
Carborundum Grinding Wheel Co Savings Plan
1011 E. Front Street
P.O Box 759
Linda J. Newberry 28,321.2700 5.58%
And Joan E. Newberry JTWROS
2311 Wealthy St SE Apt. 20
Grand Rapids, MI 49506-3038
<CAPTION>
MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS C SHARES) SHARES OWNED
<S> <C> <C>
SEI Investments Co. 100.0000 100.00%
ATTN: Rob Silvestri
One Freedom Valley Road
Oaks, PA 19456
<CAPTION>
MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 983,493,987.7400 29.90%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 185,118,091.7500 5.63%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 346,114,483.5700 10.52%
Operations Center
Attn: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 537,126,632.3300 16.33%
Money Market Unit/Loc 5312
4100 W. 150th Street
Cleveland, OH 44135-1389
</TABLE>
-146-
<PAGE> 191
<TABLE>
<S> <C> <C>
National City Bank 311,447,652.8300 9.47%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
<CAPTION>
GOVERNMENT MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
National City MI/IL 198,455,000.000 36.58%
FBO Corporate Sweep Customer
Cash Management Operations
770 W. Broad Street Loc. 16-0347
Columbus, OH 43222-1419
Pennsylvania 230,558,000.000 42.50%
FBO Corporate Autosweep Customers
c/o National City Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15222-2003
Wheat First Securities 63,006,398.1500 11.61%
P.O. Box 6629
Glen Allen, VA 23058-6629
<CAPTION>
GOVERNMENT MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 76,794,523.2800 7.34%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 West 150th Street
Cleveland, OH 44135-1389
National City Bank 247,716,188.7200 23.69%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 216,162,281.6500 20.67%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
</TABLE>
-147-
<PAGE> 192
<TABLE>
<S> <C> <C>
National City Bank 124,851,820.5300 11.94%
Operations Center
Attn: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 94,386,597.6100 9.03%
Money Market Unit/Loc 5312
4100 W. 150th St
Cleveland, OH 44135-1389
National City Bank 147,951,194.2900 14.15%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
<CAPTION>
TREASURY MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
National City Bank MI/IL 60,684,000.000 71.93%
FBO Corporate Sweep Customer
Cash Management Operations
770 W. Broad St. Location 16-0347
Columbus, OH 43222-1419
Wheat First Securities 17,274,615.7700 20.48%
P.O. Box 6629
Glen Allen, VA 23058-6629
<CAPTION>
TREASURY MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 33,038,427.8600 7.79%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 64,779,974.8900 15.27%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 40,533,708.7600 9.55%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
</TABLE>
-148-
<PAGE> 193
<TABLE>
<S> <C> <C>
National City Bank 25,935,836.5900 6.11%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 131,285,256.9200 30.94%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 33,288,330.2100 7.85%
Money Market Unit/Loc. 5312
4100 W 150th St
Cleveland, OH 44135-1389
National City Bank 36,231,710.7500 8.54%
Trust Operations
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
<CAPTION>
TREASURY PLUS MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
The Bank of New York 1,626,609.1700 90.15%
TRST FOA CCMT Series 1995-2
Attn: Craig Phildius
101 Barclay Street 12E
New York, NY 10286-0099
<CAPTION>
TREASURY PLUS MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 168,209,488.9300 94.69%
Money Market Unit / Loc 5312
4100 W. 150th Street
Cleveland, OH 44135-1389
<CAPTION>
OHIO MUNICIPAL MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS A SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 2,415,520.8300 7.30%
FBO PCG/Retail Sweep Customers
770 W. Broad Street, Location 16-0347
Columbus, OH 43222-1419
</TABLE>
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<PAGE> 194
<TABLE>
<S> <C> <C>
National City Bank 27,038,369.1300 81.75%
FBO PCG/Retail Sweep Customers
770 W. Broad Street, Location 16-0347
Columbus, OH 43222-1419
First Clearing Corporation 1,784,539.9900 5.40%
A/C 7655-6279
Stephen Sweetnich
Christine Sweetnich
10114 Highland Drive
Brecksville, OH 44141-3327
<CAPTION>
OHIO MUNICIPAL MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
(CLASS I SHARES) SHARES OWNED
<S> <C> <C>
National City Bank 24,695,728.2500 17.73%
Trust Operations
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 26,717,216.4400 19.18%
Trust Operations
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 67,457,074.5500 48.44%
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
NatCity Investments 9,969,704.6000 7.16%
Attn: Jo Bredt
1965 East Sixth Street Loc #3090
Cleveland, OH 44114-2214
<CAPTION>
PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND
CLASS (A SHARES) SHARES OWNED
<S> <C> <C>
Pennsylvania 24,536,000.0000 43.05%
FBO Corporate Autosweep Customers
c/o National City Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15222-2003
</TABLE>
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<PAGE> 195
<TABLE>
<S> <C> <C>
Pennsylvania 29,310,398.930 51.43%
National City Bank of Pennsylvania
FBO PCG/Retail Sweep Customers
Cash Management Operations
770 W. Broad Street 16-0347
Columbus, OH 43222-1419
<CAPTION>
PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
(CLASS I SHARES) OUTSTANDING SHARES PERCENTAGE OF FUND
SHARES OWNED
<S> <C> <C>
National City Bank 104,452,048.8300 97.74%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
<CAPTION>
EQUITY GROWTH FUND
(CLASS A SHARES) OUTSTANDING SHARES PERCENTAGE OF FUND
SHARES OWNED
<S> <C> <C>
State Street Bank & Trust TTEE 4,735,530.3400 75.63%
FBO First Energy Corp.
Savings Plan
DTD 7/1/98
105 Rosemont Ave. WES/IN
Westwood, MA 02090-2318
<CAPTION>
EQUITY GROWTH FUND
(CLASS B SHARES) OUTSTANDING SHARES PERCENTAGE OF FUND
SHARES OWNED
<S> <C> <C>
First Clearing Corporation 6,778.2040 5.18%
A/C 4815-5374
Ernest Kline IRA
WFS as Custodian
12 Deerfield Lane
Beachwood, OH 44122-7502
<CAPTION>
EQUITY GROWTH FUND
(CLASS C SHARES) OUTSTANDING SHARES PERCENTAGE OF FUND
SHARES OWNED
<S> <C> <C>
First Clearing Corporation 1,277.5060 13.78%
A/C 7081-0852
Ridgway Community Nurses Srvcs
ATTN: Lori MacDonald
20 North Broad Street
Ridgway, PA 15853-1002
</TABLE>
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<PAGE> 196
<TABLE>
<S> <C> <C>
First Clearing Corporation 589.6640 6.36%
A/C 4858-4008
Mary S. Kowtun IRA
FCC as Custodian
6417 Rousseau Drive
Parma, OH 44129-6306
First Clearing Corporation 645.2610 7.06%
A/C 4089-7903
Hart Road Pathology SC PS
FBO Dr. James Larson
1205 Main Street
Cross Plains, WI 53528-9479
First Clearing Corporation 850.4610 9.17%
A/C 6490-8961
Homer M. Osborne IRA
FCC as Custodian
5 Patricia St
Charleroi, PA 15022-9439
First Clearing Corporation 4,140.2400 44.67%
A/C 1294-3972
Robert Henry Baker Jr IRA
FCC as Custodian
834 Georgiana St
Port Angeles, WA 98362-3512
<CAPTION>
EQUITY GROWTH FUND
(CLASS I SHARES) OUTSTANDING SHARES PERCENTAGE OF FUND
SHARES OWNED
<S> <C> <C>
Sheldon & Co. (Cash/Reinv) 12,142,781.0660 28.10%
C/o National City Bank
ATTN: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 6,607,731.2680 15.29%
P.O. Box 94984
ATTN: Trust Mutual Funds
Cleveland, OH 44101-4984
C/O National City Bank 23,361,479.6730 54.07%
Shelden & Co.
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
</TABLE>
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<PAGE> 197
FINANCIAL STATEMENTS
The semi-annual and annual reports to shareholders with
respect to the Funds have been filed with the SEC. The unaudited financial
statements contained in the semi-annual report to shareholders for the period
ended November 30, 1999, and the audited financial statements contained in the
annual report to shareholders for the fiscal year ended May 31, 1999 are
incorporated herein by reference. No other parts of the semi-annual or annual
reports are incorporated herein by reference. Copies of the Funds' semi-annual
and annual reports 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.
The semi-annual report to shareholders with respect to the
Predecessor Parkstone Funds for the period ended November 30, 1999 has been
filed with the SEC. The financial statements in such semi-annual report are
incorporated by reference into this Statement of Additional Information. No
other parts of the semi-annual report to shareholders are incorporated by
reference herein. The financial statements and financial highlights included in
such semi-annual report are unaudited.
The annual report to shareholders with respect to the
Predecessor Parkstone Funds for the fiscal year ended May 31, 1999 has been
filed with the SEC. The financial statements contained in such annual report
are incorporated by reference into this Statement of Additional Information. No
other parts of the annual report to shareholders are incorporated by reference
herein. The financial statements and financial highlights for the Predecessor
Parkstone Funds included in such annual report to shareholders have been
audited by the Predecessor Parkstone Funds' independent accountants,
PricewaterhouseCoopers, LLP, whose report thereon also appears in such annual
report and is also incorporated herein by reference. The financial statements
in such annual report has been incorporated herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
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<PAGE> 198
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" - An obligation rated "AAA" has the highest rating
assigned by Standard & Poor's. The obligor's capacity to meet its financial
commitment on the obligation is extremely strong.
"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.
Obligations rated "BB," "B," "CCC," "CC" and "C" are 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" - An obligation rated "BB" is less vulnerable to
nonpayment 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" - An obligation rated "B" is more vulnerable to
nonpayment 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 nonpayment, 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 nonpayment.
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<PAGE> 199
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action taken, but payments on
this obligation are being continued.
"D" - An obligation rated "D" is 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 also will be used upon the filing of a bankruptcy petition or the
taking of a 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.
"c" - The 'c' subscript is used to provide additional
information to investors that the bank may terminate its obligation to purchase
tendered bonds if the long-term credit rating of the issuer is below an
investment-grade level and/or the issuer's bonds are deemed taxable.
"p" - The letter 'p' indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project financed by the debt being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful,
timely completion of the project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes no comment on the
likelihood of or the risk of default upon failure of such completion. The
investor should exercise his own judgment with respect to such likelihood and
risk.
* Continuance of the ratings is contingent upon Standard &
Poor's receipt of an executed copy of the escrow agreement or closing
documentation confirming investments and cash flows.
"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.
N.R. Not rated. Debt obligations of issuers outside the
United States and its territories are rated on the same basis as domestic
corporate and municipal issues. The ratings measure the creditworthiness of the
obligor but do not take into account currency exchange and related
uncertainties.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
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<PAGE> 200
"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 risk appear somewhat larger than the "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" indicates poor standing; "Ca" represents
obligations which are speculative in a high degree; and "C" represents the
lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each
generic rating classification from "Aa" through "Caa." The modifier 1 indicates
that the obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a
ranking in the lower end of its generic rating category.
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<PAGE> 201
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 to be 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 IBCA for
corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the
highest credit quality. These ratings denote the lowest expectation of credit
risk and are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
affected by reasonably foreseeable events.
"AA" - Bonds considered to be investment grade and of very
high credit quality. These ratings denote a very low expectation of credit risk
and indicate very strong capacity for timely payment of financial commitments.
This capacity is not significantly vulnerable to foreseeable events.
"A" - Bonds considered to be investment grade and of high
credit quality. These ratings denote a low expectation of credit risk and
indicate strong capacity for timely payment of financial commitments. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or
in economic conditions than is the case for higher ratings.
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<PAGE> 202
"BBB" - Bonds considered to be investment grade and of
satisfactory credit quality. These ratings denote that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment grade category.
"BB" - Bonds considered to be speculative. These ratings
indicate that there is a possibility of credit risk developing, particularly as
the result of adverse economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be met.
Securities rated in this category are not investment grade.
"B" - Bonds are considered highly speculative. These ratings
indicate that significant credit risk is present, but a limited margin of
safety remains. Financial commitments are currently being met; however,
capacity for continued payment is contingent upon a sustained, favorable
business and economic environment.
"CCC," "CC" and "C" - Bonds have high default risk. Default
is a real possibility, and capacity for meeting financial commitments is solely
reliant upon sustained, favorable business or economic developments. "CC"
ratings indicate that default of some kind appears probable, and "C" ratings
signal imminent default.
"DDD," "DD" and "D" - Bonds are in default. The ratings of
obligations in this category are based on their prospects for achieving partial
or full recovery in a reorganization or liquidation of the obligor. While
expected recovery values are highly speculative and cannot be estimated with
any precision, the following serve as general guidelines. "DDD" obligations
have the highest potential for recovery, around 90%-100% of outstanding amounts
and accrued interest. "DD" indicates potential recoveries in the range of
50%-90%, and "D" the lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all
of their obligations. Entities rated "DDD" have the highest prospect for
resumption of performance or continued operation with or without a formal
reorganization process. Entities rated "DD" and "D" are generally undergoing a
formal reorganization or liquidation process; those rated "DD" are likely to
satisfy a higher portion of their outstanding obligations, while entities rated
"D" have a poor prospect for repaying all obligations.
To provide more detailed indications of credit quality, the
Fitch IBCA ratings from and including "AA" to "CCC" may be modified by the
addition of a plus (+) or minus (-) sign to denote relative standing within
these major rating categories.
'NR' indicates the Fitch IBCA does not rate the issuer or
issue in question.
'Withdrawn': A rating is withdrawn when Fitch IBCA deems the
amount of information available to be inadequate for rating purposes, or when
an obligation matures, is called, or refinanced.
A-5
<PAGE> 203
RatingAlert: Ratings are placed on RatingAlert to notify
investors that there is a reasonable probability of a rating change and the
likely direction of such change. These are designated as "Positive", indicating
a potential upgrade, "Negative", for a potential downgrade, or "Evolving", if
ratings may be raised, lowered or maintained. RatingAlert is typically resolved
over a relatively short period.
Thomson Financial 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 indicates that the ability to repay
principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to
repay principal and interest on a timely basis, with limited incremental risk
compared to issues rated in the highest category.
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BBB" - This designation represents Thomson BankWatch's
lowest investment-grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned
by Thomson Financial 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 opinion of the creditworthiness of an obligor with respect to financial
obligations having an original maturity of no
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<PAGE> 204
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.
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.
A-7
<PAGE> 205
"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 the highest certainty of timely
payment. Short-term liquidity, including internal operating factors and/or
access to alternative sources of funds, is outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
"D-2" - Debt possesses good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
"D-3" - Debt possesses satisfactory liquidity and other
protection factors qualify issues as investment grade. Risk factors are larger
and subject to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment
characteristics. Liquidity is not sufficient to ensure against disruption in
debt service. Operating factors and market access may be subject to a high
degree of variation.
"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.
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<PAGE> 206
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 best capacity for timely payment of financial
commitments and may have an added "+" to denote any exceptionally strong credit
feature.
"F2" - Securities possess good credit quality. This
designation indicates a satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.
"F3" - Securities possess fair credit quality. This
designation indicates that the capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could result in a
reduction to non-investment grade.
"B" - Securities possess speculative credit quality. This
designation indicates minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in financial and
economic conditions.
"C" - Securities possess high default risk. This designation
indicates that default is a real possibility and that the capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business
and economic environment.
"D" - Securities are in actual or imminent payment default.
Thomson Financial BankWatch short-term ratings assess the
likelihood of an untimely payment of principal and interest of debt instruments
with original maturities of one year or less. The following summarizes the
ratings used by Thomson Financial BankWatch:
"TBW-1" - This designation represents Thomson Financial
BankWatch's highest category and indicates a very high likelihood that
principal and interest will be paid on a timely basis.
"TBW-2" - This designation represents Thomson Financial
BankWatch's second-highest category and indicates that while the degree of
safety regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson Financial
BankWatch's lowest investment-grade category and indicates that while the
obligation is more susceptible to adverse developments (both internal and
external) than those with higher ratings, the capacity to service principal and
interest in a timely fashion is considered adequate.
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<PAGE> 207
"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 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.
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.
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"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 commercial paper rating is a current
opinion of the creditworthiness of an obligor with respect to financial
obligations 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.
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
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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 best 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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"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 factors
and market access risks unique to notes due in three years or less. The
following summarizes the ratings used by Standard & Poor's 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.
Margins of protection ample although not so large as in the preceding group.
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"MIG-3"/"VMIG-3" - This designation denotes favorable
quality, with all security elements accounted for but lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.
"SG" - This designation denotes speculative quality. Debt
instruments in this category lack of margins of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings
described under Commercial Paper Ratings for municipal notes.
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APPENDIX B
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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.
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Similarly, the closing out of a futures contract purchase is effected by the
Fund entering into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the Fund realizes a gain, and if the purchase price
exceeds the offsetting sale price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction
environment on the floors of several exchanges -- principally, the Chicago
Board of Trade, the Chicago Mercantile Exchange and the New York Futures
Exchange. The Fund would deal only in standardized contracts on recognized
exchanges. Each exchange guarantees performance under contract provisions
through a clearing corporation, a nonprofit organization managed by the
exchange membership.
A public market now exists in futures contracts covering
various financial instruments including long-term United States Treasury Bonds
and Notes; Government National Mortgage Association (GNMA) modified
pass-through mortgage backed securities; three-month United States Treasury
Bills; and ninety-day commercial paper. The Fund may trade in any interest rate
futures contracts for which there exists a public market, including, without
limitation, the foregoing instruments.
EXAMPLE OF FUTURES CONTRACT SALE. The Fund may engage in an
interest rate futures contract sale to maintain the income advantage from
continued holding of a long-term bond while endeavoring to avoid part or all of
the loss in market value that would otherwise accompany a decline in long-term
securities prices. Assume that the market value of a certain security held by
the Fund tends to move in concert with the futures market prices of long-term
United States Treasury bonds ("Treasury bonds"). The adviser wants to fix the
current market value of this fund security until some point in the future.
Assume the fund security has a market value of 100, and the adviser believes
that because of an anticipated rise in interest rates, the value will decline
to 95. The Fund might enter into futures contract sales of Treasury bonds for a
equivalent of 98. If the market value of the fund security does indeed decline
from 100 to 95, the equivalent futures market price for the Treasury bonds
might also decline from 98 to 93.
In that case, the five point loss in the market value of the
fund security would be offset by the five point gain realized by closing out
the futures contract sale. Of course, the futures market price of Treasury
bonds might well decline to more than 93 or to less than 93 because of the
imperfect correlation between cash and futures prices mentioned below.
The adviser could be wrong in its forecast of interest rates
and the equivalent futures market price could rise above 98. In this case, the
market value of the fund securities, including the fund security being
protected, would increase. The benefit of this increase would be reduced by the
loss realized on closing out the futures contract sale.
If interest rate levels did not change, the Fund in the above
example might incur a loss (which might be reduced by a offsetting transaction
prior to the settlement date). In each transaction, transaction expenses would
also be incurred.
EXAMPLE OF FUTURES CONTRACT PURCHASE. The Fund may engage in
an interest rate futures contract purchase when it is not fully invested in
long-term bonds but wishes to defer for a
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time the purchase of long-term bonds in light of the availability of
advantageous interim investments, e.g., shorter term securities whose yields
are greater than those available on long-term bonds. The Fund's basic
motivation would be to maintain for a time the income advantage from investing
in the short-term securities; the Fund would be endeavoring at the same time to
eliminate the effect of all or part of a expected increase in market price of
the long-term bonds that the Fund may purchase.
For example, assume that the market price of a long-term bond
that the Fund may purchase, currently yielding 10%, tends to move in concert
with futures market prices of Treasury bonds. The adviser wishes to fix the
current market price (and thus 10% yield) of the long-term bond until the time
(four months away in this example) when it may purchase the bond. Assume the
long-term bond has a market price of 100, and the adviser believes that,
because of an anticipated fall in interest rates, the price will have risen to
105 (and the yield will have dropped to about 9 1/2%) in four months. The Fund
might enter into futures contracts purchases of Treasury bonds for an
equivalent price of 98. At the same time, the Fund would assign a pool of
investments in short-term securities that are either maturing in four months or
earmarked for sale in four months, for purchase of the long-term bond at an
assumed market price of 100. Assume these short-term securities are yielding
15%. If the market price of the long-term bond does indeed rise from 100 to
105, the equivalent futures market price for Treasury bonds might also rise
from 98 to 103. In that case, the 5 point increase in the price that the Fund
pays for the long-term bond would be offset by the 5 point gain realized by
closing out the futures contract purchase.
The adviser could be wrong in its forecast of interest rates;
long-term interest rates might rise to above 10%; and the equivalent futures
market price could fall below 98. If short-term rates at the same time fall to
10% or below, it is possible that the Fund would continue with its purchase
program for long-term bonds. The market price of available long-term bonds
would have decreased. The benefit of this price decrease, and thus yield
increase, will be reduced by the loss realized on closing out the futures
contract purchase.
If, however, short-term rates remained above available
long-term rates, it is possible that the Fund would discontinue its purchase
program for long-term bonds. The yield on short-term securities in the Fund,
including those originally in the pool assigned to the particular long-term
bond, would remain higher than yields on long-term bonds. The benefit of this
continued incremental income will be reduced by the loss realized on closing
out the futures contract purchase. In each transaction, expenses would also be
incurred.
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INDEX FUTURES CONTRACTS
GENERAL. A bond or stock index assigns relative values to the
bonds or stocks included in the index which fluctuates with changes in the
market values of the bonds or stocks included. Some stock index futures
contracts are based on broad market indexes, such as the Standard & Poor's
Ratings Group 500 or the New York Stock Exchange Composite Index. In contrast,
certain exchanges offer futures contracts on narrower market indexes or indexes
based on an industry or market segment, such as oil and gas stocks.
Futures contracts are traded on organized exchanges regulated
by the Commodity Futures Trading Commission. Transactions on such exchanges are
cleared through a clearing corporation, which guarantees the performance of the
parties to each contract.
The Fund may sell index futures contracts in order to offset
a decrease in market value of its fund securities that might otherwise result
from a market decline. The Fund may do so either to hedge the value of its fund
as a whole, or to protect against declines, occurring prior to sales of
securities, in the value of the securities to be sold. Conversely, the Fund may
purchase index futures contracts in anticipation of purchases of securities. A
long futures position may be terminated without a corresponding purchase of
securities.
In addition, the Fund may utilize index futures contracts in
anticipation of changes in the composition of its fund holdings. For example,
in the event that the Fund expects to narrow the range of industry groups
represented in its holdings it may, prior to making purchases of the actual
securities, establish a long futures position based on a more restricted index,
such as an index comprised of securities of a particular industry group. The
Fund may also sell futures contracts in connection with this strategy, in order
to protect against the possibility that the value of the securities to be sold
as part of the restructuring of the fund will decline prior to the time of
sale.
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MARGIN PAYMENTS
Unlike purchase or sales of fund securities, no price is paid
or received by the Fund upon the purchase or sale of a futures contract.
Initially, the Fund will be required to deposit with the broker or in a
segregated account with the Custodian or a subcustodian an amount of cash or
cash equivalents, known as initial margin, based on the value of the contract.
The nature of initial margin in futures transactions is different from that of
margin in security transactions in that futures contract margin does not
involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination of the
futures contract assuming all contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from the broker, will be
made on a daily basis as the price of the underlying instruments fluctuates
making the long and short positions in the futures contract more or less
valuable, a process known as marking-to-the-market. For example, when the Fund
has purchased a futures contract and the price of the contract has risen in
response to a rise in the underlying instruments, that position will have
increased in value and the Fund will be entitled to receive from the broker a
variation margin payment equal to that increase in value. Conversely, where the
Fund has purchased a futures contract and the price of the future contract has
declined in response to a decrease in the underlying instruments, the position
would be less valuable and the Fund would be required to make a variation
margin payment to the broker. At any time prior to expiration of the futures
contract, the adviser may elect to close the position by taking an opposite
position, subject to the availability of a secondary market, which will operate
to terminate the Fund's position in the futures contract. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or gain.
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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
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rate movements by the advisers may still not result in a successful hedging
transaction over a short time frame.
Positions in futures may be closed out only on an exchange or
board of trade which provides a secondary market for such futures. Although the
Fund intends to purchase or sell futures only on exchanges or boards of trade
where there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular contract or at any particular time. In such event, it may not be
possible to close a futures investment position, and in the event of adverse
price movements, the Fund would continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have been
used to hedge fund securities, such securities will not be sold until the
futures contract can be terminated. In such circumstances, an increase in the
price of the securities, if any, may partially or completely offset losses on
the futures contract. However, as described above, there is no guarantee that
the price of the securities will in fact correlate with the price movements in
the futures contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary
market in a futures contract may be adversely affected by "daily price
fluctuation limits" established by commodity exchanges which limit the amount
of fluctuation in a futures contract price during a single trading day. Once
the daily limit has been reached in the contract, no trades may be entered into
at a price beyond the limit, thus preventing the liquidation of open futures
positions. The trading of futures contracts is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation
margin payments.
Successful use of futures by the Fund is also subject to the
adviser's ability to predict correctly movements in the direction of the
market. For example, if the Fund has hedged against the possibility of a
decline in the market adversely affecting securities held by it and securities
prices increase instead, the Fund will lose part or all of the benefit to the
increased value of its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations, if
the Fund has insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising market. The Fund
may have to sell securities at a time when it may be disadvantageous to do so.
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OPTIONS ON FUTURES CONTRACTS
The Fund may purchase and write options on the futures
contracts described above. A futures option gives the holder, in return for the
premium paid, the right to buy (call) from or sell (put) to the writer of the
option a futures contract at a specified price at any time during the period of
the option. Upon exercise, the writer of the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer,
of an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same
series, at which time the person entering into the closing transaction will
realize a gain or loss. The Fund will be required to deposit initial margin and
variation margin with respect to put and call options on futures contracts
written by it pursuant to brokers' requirements similar to those described
above. Net option premiums received will be included as initial margin
deposits.
Investments in futures options involve some of the same
considerations that are involved in connection with investments in futures
contracts (for example, the existence of a liquid secondary market). In
addition, the purchase or sale of an option also entails the risk that changes
in the value of the underlying futures contract will not correspond to changes
in the value of the option purchased. Depending on the pricing of the option
compared to either the futures contract upon which it is based, or upon the
price of the securities being hedged, an option may or may not be less risky
than ownership of the futures contract or such securities. In general, the
market prices of options can be expected to be more volatile than the market
prices on the underlying futures contract. Compared to the purchase or sale of
futures contracts, however, the purchase of call or put options on futures
contracts may frequently involve less potential risk to the Fund because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). The writing of an option on a futures contract involves risks similar
to those risks relating to the sale of futures contracts.
OTHER MATTERS
Accounting for futures contracts will be in accordance with
generally accepted accounting principles.
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FORM N-1A
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PART C - OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Declaration of Trust dated January 28, 1986 is incorporated
herein by reference to Exhibit (a) to Post-Effective Amendment
No. 48 to Registrant's Registration Statement on Form N-1A
(File Nos. 33-488/811-4416) filed on October 6, 1999 ("PEA No.
48").
1. Amendment No. 1 to Declaration of Trust is
incorporated herein by reference to Exhibit a.1 to
PEA No. 48.
2. Amendment No. 2 to Declaration of Trust is
incorporated herein by reference to Exhibit a.2 to
PEA No. 48.
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 Money Market, Treasury Money Market, Tax
Exempt Money Market, Equity Growth, Bond and Ohio Tax
Exempt Bond Funds as filed with the Office of
Secretary of State of Massachusetts on December 11,
1989 is incorporated herein by reference to Exhibit
1(d) to PEA No. 26.
6. Certificate of Classification of Shares reflecting
the creation of Special Series 1 in the Money Market,
Government Money Market, Treasury Money Money, Tax
Exempt Money Market, Equity Growth, Bond and Ohio Tax
Exempt Bond Funds as filed
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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 Bond Fund,
Equity Income Fund, Small Cap Value Fund (formerly
known as the Mid Cap Regional Fund), Limited Maturity
Bond (formerly known as the 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
Money Market Fund, Bond Fund (formerly known as the
Intermediate Government Fund), GNMA Fund and
Pennsylvania Municipal Bond 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.
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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 known as the Mid Cap Regional), Limited
Maturity Bond (formerly known as the Enhanced
Income), Total Return Advantage, Intermediate Bond
(formerly known as the Fixed Income), Ohio Tax-Exempt
Bond, National Tax-Exempt Bond, Pennsylvania
Tax-Exempt Money Market, Bond (formerly known as the
"Intermediate Government Fund), GNMA, Pennsylvania
Municipal Bond, International Equity, Equity Index,
Core Equity, Small Cap Growth and Real Return
Advantage Funds, as filed with the Office of the
Secretary of State of Massachusetts on December 29,
1997 and with the City of Boston, Office of the City
Clerk on December 26, 1997, is incorporated herein by
reference to Exhibit 1(j) to Post-Effective Amendment
No. 44 to Registrant's Registration Statement filed
on September 18, 1998 ("PEA No 44").
12. Certificate of Classification of Shares reflecting
the creation of Class Z, Class Z - Special Series 1
and Class Z - Special Series 2, Class AA, Class AA -
Special Series 1 and Class AA - Special Series 2
Shares representing interests in the Tax Managed
Equity and Balanced Allocation Funds, respectively,
as filed with the Office of the Secretary of State of
Massachusetts and with the City of Boston, Office of
the City Clerk on July 13, 1998 is incorporated
herein by reference to Exhibit (1)(k) to PEA No. 44.
13. Certificate of Classification of Shares reflecting
the creation of Class BB and Class BB - Special
Series 1 shares in the Ohio Municipal Money Market
Fund, as filed with the Office of the Secretary of
State and with the City of Boston, Office of the City
Clerk on September 15, 1998, is incorporated herein
by reference to Exhibit 1(k) to Post-Effective
Amendment No. 43 to Registrant's Registration
Statement filed on September 15, 1998 ("PEA No. 43").
(b) Code of Regulations as approved and adopted by Registrant's
Board of Trustees on January 28, 1986 is incorporated herein
by reference to Exhibit b. to PEA No. 48.
1. Amendment No. 1 to Code of Regulations is
incorporated herein by reference to Exhibit b.1 to
PEA No. 48.
2. Amendment No. 2 to Code of Regulations as approved
and adopted by Registrant's Board of Trustees on July
17, 1997 is incorporated herein by reference to
Exhibit 2(b) to PEA No. 35.
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(c) See Article V, Section 5.1, and Article V, Section
5.4, of Registrant's Declaration of Trust, which is
incorporated herein by reference as Exhibit a to PEA
No. 48.
(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 Bond, Intermediate Bond, GNMA,
Bond, Equity Growth, Equity Income, Small Cap Value,
Ohio Tax Exempt Bond and Pennsylvania Municipal Bond
Funds between Registrant and National City Bank,
dated November 19, 1997 is incorporated by reference
to Exhibit 5 (a) to PEA No. 44.
1. Interim Advisory Agreement for the Limited Maturity
Bond (formerly known as the Enhanced Income) and
Total Return Advantage Funds between Registrant and
National Asset Management Corporation dated March 6,
1998 is incorporated by reference to Exhibit 5(b) to
PEA No. 44.
2. 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.
3. New Advisory Agreement for the Core Equity, Limited
Maturity Bond (formerly known as the 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.
4. 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.
5. 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. 43 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.
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(g) (2) Custodian Services Agreement between Registrant and
National City Bank, dated November 7, 1994 is
incorporated herein by reference to Exhibit g.1 to
PEA No. 48.
1. Sub-Custodian Agreement between National City Bank
and The Bank of California, National Association,
dated November 7, 1994 is incorporated herein by
reference to Exhibit g.2 to PEA No. 48.
2. 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 Post-Effective Amendment No. 36 to
Registrant's Registration Statement on Form N-1A
(File No. 33-488/811-4416) filed on September 30,
1997 ("PEA No. 36").
3. 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 Post-Effective Amendment No. 41 to Registrant's
Registration Statement on Form N-1A (File No.
33-488/811-4416) filed on February 23, 1998 ("PEA No.
41").
(h) (3) 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.
1. Administration Agreement between Registrant and SEI
Fund Resources, dated May 1, 1998 is incorporated by
reference to Exhibit 9(b) to PEA No. 44.
2. 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.
3. 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.
4. 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.
5. 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.
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6. 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.
7. 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) (1) Consent of Ernst & Young LLP.
(k) (2) Consent of PricewaterhouseCoopers LLP.
(l) (4) Purchase Agreements between Registrant and
McDonald & Company Securities, Inc. dated January 28,
1986 is incorporated herein by reference to Exhibit
l.1 to PEA No. 48.
1. Purchase Agreement between Registrant and McDonald &
Company Securities, Inc. with respect to the Tax
Exempt Money Market Portfolio dated July 19, 1988 is
incorporated herein by reference to Exhibit l.2 to
PEA No. 48.
2. Purchase Agreement between Registrant and McDonald &
Company Securities, Inc. with respect to the Tax
Exempt Money Market Portfolio (Trust), dated October
17, 1989 is incorporated herein by reference to
Exhibit l.3 to PEA No. 48.
3. Purchase Agreement between Registrant and McDonald &
Company Securities, Inc. with respect to the Equity
Growth Portfolio and Bond Portfolio, dated December
20, 1989 is incorporated herein by reference to
Exhibit l.4 to PEA No. 48.
4. Purchase Agreement between Registrant and McDonald &
Company Securities, Inc. with respect to the Ohio Tax
Exempt Bond Portfolio, dated January 5, 1990 is
incorporated herein by reference to Exhibit l.5 to
PEA No. 48.
5. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Limited
Maturity Bond Fund
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(formerly known as the Enhanced Income Fund), dated
July 5, 1994 is incorporated herein by reference to
Exhibit 1.6 to PEA No. 48.
6. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Equity Income
Portfolio, dated June 30, 1994 is incorporated herein
by reference to Exhibit l.7 to PEA No. 48.
7. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Small Cap Value
Fund (formerly known as the Mid Cap Regional Equity
Portfolio), dated July 25, 1994 is incorporated
herein by reference to Exhibit l.8 to PEA No. 48.
8. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Total Return
Advantage Fund, dated July 5, 1994 is incorporated
herein by reference to Exhibit l.9 to PEA No. 48.
9. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the National Tax
Exempt Bond Fund is incorporated herein by reference
to Exhibit l.10 to PEA No. 48.
10. 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.
11. 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.
12. Purchase Agreement between Registrant and 440
Financial Distributors, Inc. with respect to the GNMA
Fund, dated September 6, 1996, is incorporated herein
by reference to Exhibit 13(l) to PEA No. 33.
13. Purchase Agreement between Registrant and 440
Financial Distributors, Inc. with respect to the
Pennsylvania Municipal Bond Fund, dated September 6,
1996, is incorporated herein by reference to Exhibit
13(m) to PEA No. 33.
14. 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.
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15. 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.
16. 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.
17. 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.
18. 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.
19. 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 Post-Effective
Amendment No. 38 to Registrant's Registration
Statement on Form N-1A (File No. 33-488/811-4416)
filed on December 18, 1997 ("PEA No. 38").
20. 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.
21. Form of Purchase Agreement between Registrant and SEI
Investments Distribution Co. with respect to the Ohio
Municipal Money Market Fund is incorporated herein by
reference to Exhibit 13(u) to PEA No. 42.
(m) (5) 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.
1. B shares Distribution and Servicing Plan is
incorporated herein by reference to Exhibit 15(b) to
PEA No. 38.
2. 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.
(p) Code of Ethics to be filed by Amendment.
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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 (e) hereto, and Sections 12 and 6, respectively, of the
Custodian Services and Transfer Agency Agreements, incorporated by reference as
Exhibits g.1 and h.4 hereto. In Article 6 of the Distribution Agreement, the
Trust agrees to indemnify and hold harmless the Distributor and each of its
directors and officers and each person, if any, who controls the Distributor
within the meaning of Section 15 of the 1933 Act against any loss, liability,
claim, damages or expense (including the reasonable cost of investigating or
defending any alleged loss, liability, claim, damages or expense and reasonable
counsel fees and disbursements incurred in connection therewith), arising by
reason of any person acquiring any Shares, based upon the ground that the
registration statement, prospectus, Shareholder reports or other information
filed or made public by the Trust (as from time to time amended) included an
untrue statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements made not misleading.
However, the Trust does not agree to indemnify the Distributor or hold it
harmless to the extent that the statements or omission was made in reliance
upon, and in conformity with, information furnished to the Trust by or on behalf
of the Distributor.
In addition, Section 9.3 of Registrant's Declaration of Trust
dated January 28, 1986, incorporated by reference as Exhibit (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 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
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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.
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.
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(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
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
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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 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.
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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"). In 1998, the
Corporation 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.
NATIONAL CITY INVESTMENT MANAGEMENT COMPANY
<TABLE>
<CAPTION>
Position with National
City Investment
Management Other Business Type of
Name Company Connections Business
---- ----------------- ---------------- --------
<S> <C> <C> <C>
Kathleen T. Barr Managing Director, National City Bank Bank affiliate
Sales and Marketing
Robert M. Leggett Vice Chairman of the National City Bank Bank affiliate
Board, President and
Managing Director
</TABLE>
C-13
<PAGE> 234
<TABLE>
<CAPTION>
Position with National
City Investment
Management Other Business Type of
Name Company Connections Business
---- ----------------- ---------------- --------
<S> <C> <C> <C>
Michael Minnaugh Chairman of the Board National City Bank Bank affiliate
and Managing Director
Joseph C. Penko Vice President and National City Bank Bank affiliate
Director, Legal Affairs
Donald L. Ross Chief Investment National City Bank Bank affiliate
Officer and Managing
Director
</TABLE>
(b) Sub-Investment Adviser: National Asset Management
Corporation ("NAM").
NAM performs sub-investment advisory services for the
Registrant's Total Return Advantage and Core Equity Funds. NAM is an investment
adviser registered under the Investment Advisers Act of 1940 (the "Advisers
Act").
To the knowledge of Registrant, none of the directors or
officers of NAM, except those set forth below, is or has been at any time during
the past two calendar years engaged in any other business, profession, vocation
or employment of a substantial nature. Set forth below are the names and
principal business of the directors and certain of the senior executive officers
of NAM who are engaged in any other business, profession, vocation, or
employment of a substantial nature.
NATIONAL ASSET MANAGEMENT CORPORATION
<TABLE>
<CAPTION>
Position with 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
</TABLE>
C-14
<PAGE> 235
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
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:
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
The PBHG Funds, Inc.
C-15
<PAGE> 236
The Achievement Funds Trust
Bishop Street Funds
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.
CNI Charter Funds
The Armada Advantage Fund
Amerindo Funds, Inc.
Friends Ivory Funds
Huntington VA Funds
Boston 1784 Funds
SEI Insurance Products Trust
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").
(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
Richard B. Lieb Director, Executive Vice President --
Carmen V. Romeo Director --
</TABLE>
C-16
<PAGE> 237
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name With Underwriter With Registrant
---- ---------------- ---------------
<S> <C> <C>
Mark J. Held President & Chief Operating Officer --
Gilbert L. Beebower Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & Treasurer --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Kevin P. Robins Senior Vice President --
Patrick K. Walsh Senior Vice President --
Robert Aller Vice President --
Todd Cipperman Vice President, Assistant Secretary & --
General Counsel
S. Courtney E. Collier Vice President & Assistant Secretary --
Robert Crudup Vice President & Managing Director --
Richard A. Deak Vice-President & Assistant Secretary --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
James R. Foggo Vice-President & Assistant Secretary --
Vic Galef Vice President & Managing Director --
Lydia A. Gavalis Vice President & Assistant Secretary --
Greg Gettinger Vice President & Assistant Secretary --
Kathy Heilig Vice President --
Jeff Jacobs Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Christine M. McCullough Vice President & Assistant Secretary --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President & Managing Director --
</TABLE>
C-17
<PAGE> 238
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name With Underwriter With Registrant
---- ---------------- ---------------
<S> <C> <C>
Mark Nagle Vice President --
Joanne Nelson Vice President --
Cynthia M. Parrish Vice President & Secretary
Kim Rainey Vice President --
Rob Redican Vice President --
Maria Rinehart Vice President --
Daniel Spaventa Vice President --
Lynda J. Striegel Vice President & Assistant Secretary --
Lori L. White Vice President & Assistant Secretary --
</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) 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).
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-18
<PAGE> 239
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. 51 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 26th day of June, 2000.
<TABLE>
<CAPTION>
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. 51 to Registrant's
Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
<S> <C> <C>
Signature Title Date
--------- ----- ----
/s/ John H. Leven Treasurer June 26, 2000
------------------
John H. Leven
*Leigh Carter Trustee June 26, 2000
---------------------
Leigh Carter
*John F. Durkott Trustee June 26, 2000
--------------------
John F. Durkott
*Robert J. Farling Trustee June 26, 2000
---------------------
Robert J. Farling
*Richard W. Furst Trustee June 26, 2000
--------------------
Richard W. Furst
*Gerald Gherlein Trustee June 26, 2000
--------------------
Gerald Gherlein
*Herbert Martens President and Trustee June 26, 2000
--------------------
Herbert Martens
* Robert D. Neary Trustee and Chairman June 26, 2000
-------------------
Robert D. Neary of the Board
* J. William Pullen Trustee June 26, 2000
--------------------
J. William Pullen
</TABLE>
*By: /s/ W. Bruce Mcconnel
----------------------
W. Bruce McConnel
Attorney-in-Fact
C-19
<PAGE> 240
ARMADA FUNDS
CERTIFICATE OF SECRETARY
The following resolution was duly adopted by the Board of Trustees of
Armada Funds on May 11, 2000 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
---------------------
W. Bruce McConnel
Secretary
Dated: June 26, 2000
<PAGE> 241
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> 242
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> 243
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> 244
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> 245
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> 246
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> 247
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> 248
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> 249
EXHIBIT INDEX
-------------
(j) Consent of Drinker Biddle & Reath LLP.
(k) (1) Consent of Ernst & Young LLP.
(k) (2) Consent of PricewaterhouseCoopers LLP.
