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As filed with the Securities and Exchange Commission on July 18, 2000
Registration No. 33-00488/811-04416
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/x/
POST-EFFECTIVE AMENDMENT NO. 52
/x/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
/x/
Amendment No. 51
/x/
Armada Funds (formerly known as "NCC Funds")
(Exact Name of Registrant as Specified in Charter)
One Freedom Valley Drive
Oaks, Pennsylvania, 19456
(Address of Principal Executive Offices)
Registrant's Telephone Number:
1-800-622-FUND
W. Bruce McConnel, III, Esq.
DRINKER BIDDLE & REATH LLP
One Logan Square
18th and Cherry Streets
Philadelphia, Pennsylvania 19103-6996
(Name and Address of Agent for Service)
Copy to:
Thomas F. Harvey, Esq.
National City Bank
National City Center
P.O. Box 5756
Cleveland, Ohio 44101-0756
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (b)
[X] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(iii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
==========================
The Title of Securities Being Registered . . . . Shares of beneficial interest
<PAGE>
ARMADA FUNDS
CLASS A, CLASS B, CLASS C SHARES (RETAIL)
AND CLASS I SHARES (INSTITUTIONAL)
PROSPECTUS
OCTOBER 2, 2000
ARMADA STRATEGIC INCOME BOND FUND
INVESTMENT ADVISER
NATIONAL CITY INVESTMENT MANAGEMENT COMPANY
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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HOW TO READ THIS PROSPECTUS
The Armada Funds (the Trust) is a mutual fund family that offers different
classes of shares in separate investment portfolios (Funds). The Funds have
individual investment goals and strategies. This prospectus gives you important
information that you should know about the Class A, Class B, Class C and
Class I Shares of the Strategic Income Bond Fund (the Fund) before investing.
Please read this prospectus and keep it for future reference.
The Trust also offers Retail and Institutional Shares of the following
portfolios in separate prospectuses which are available by calling
1-800-622-FUND (3863).
Armada Core Equity Fund
Armada Equity Growth Fund
Armada Equity Income Fund
Armada Equity Index Fund
Armada International Equity Fund
Armada Large Cap Ultra Fund
Armada Mid Cap Growth Fund
Armada Small Cap Growth Fund
Armada Small Cap Value Fund
Armada Tax Managed Equity Fund
Armada Balanced Allocation Fund
Armada Bond Fund
Armada GNMA Fund
Armada Intermediate Bond Fund
Armada Limited Maturity Bond Fund
Armada Total Return Advantage Fund
Armada U.S. Government Income Fund
Armada Michigan Municipal Bond Fund
Armada National Tax Exempt Bond Fund
Armada Ohio Tax Exempt Bond Fund
Armada Pennsylvania Municipal Bond Fund
Armada Government Money Market Fund
Armada Money Market Fund
Armada Ohio Municipal Money Market Fund
Armada Pennsylvania Tax Exempt
Money Market Fund
Armada Tax Exempt Money Market Fund
Armada Treasury Money Market Fund
Armada Treasury Plus Money Market Fund
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN
REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME GENERAL
INFORMATION YOU SHOULD KNOW ABOUT THE FUND. FOR MORE DETAILED INFORMATION ABOUT
THE FUND, PLEASE SEE:
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Armada Strategic Income Bond Fund........................... 4
More Information About Risk................................. 7
The Fund's Other Investments................................ 10
The Investment Adviser and Investment Team.................. 10
Purchasing, Selling and Exchanging Fund Shares.............. 11
Dividends and Taxes......................................... 20
</TABLE>
2
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INTRODUCTION
The Fund is a mutual fund. A mutual fund pools shareholders' money and,
using professional investment managers, invests it in securities.
Fund performance is measured against an index. An index measures the market
prices of a specific group of securities in a particular market or securities in
a market sector. You cannot invest directly in an index. Unlike a mutual fund,
an index does not have an investment adviser and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower.
Class A, Class B, Class C and Class I Shares have different expenses and
other characteristics, allowing you to choose the class that best suits your
needs. You should consider the amount you want to invest, how long you plan to
have it invested, and whether you plan to make additional investments.
CLASS A SHARES
- FRONT-END SALES CHARGE
- 12B-1 FEES
- $500 MINIMUM INITIAL INVESTMENT
CLASS B SHARES
- CONTINGENT DEFERRED SALES CHARGE
- HIGHER 12B-1 FEES
- $500 MINIMUM INITIAL INVESTMENT
CLASS C SHARES
- CONTINGENT DEFERRED SALES CHARGE
- HIGHER 12B-1 FEES
- $500 MINIMUM INITIAL INVESTMENT
CLASS I SHARES
- NO SALES CHARGE
- 12B-1 FEES
- NO MINIMUM INITIAL INVESTMENT
- ONLY AVAILABLE THROUGH AUTHORIZED INSTITUTIONS
RISK/RETURN SUMMARY
The Fund has its own investment goal and strategies for reaching that goal.
The investment management team invests Fund assets in a way that they believe
will help the Fund achieve its goal. Still, investing in this Fund involves risk
and there is no guarantee that the Fund will achieve its goal. The investment
management team's judgments about the markets, the economy, or companies may not
anticipate actual market movements, economic conditions or company performance,
and these judgments may affect the return on your investment.
No matter how good a job an investment manager does, you could lose money on
your investment in the Fund, just as you could with other investments.
An investment in the Fund is not a bank deposit and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any government
agency.
The value of your investment in the Fundis based primarily on the market
value of the securities the Fund holds. These prices change daily due to
economic and other events that affect particular companies and other issuers.
These price movements, sometimes called volatility, may be greater or lesser
depending on the types of securities the Fund owns and the markets in which they
trade. The effect on the Fund of a change in the value of a single security will
depend on how widely the Fund diversifies its holdings.
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ARMADA STRATEGIC INCOME BOND FUND
FUND SUMMARY
<TABLE>
<S> <C>
INVESTMENT GOAL High current income with some capital appreciation
INVESTMENT FOCUS A combination of investment grade, high-yield and foreign
fixed income securities
SHARE PRICE VOLATILITY Medium to high
(RELATIVE TO MUTUAL FUNDS
GENERALLY)
PRINCIPAL INVESTMENT STRATEGY Allocating assets among different fixed income security
sectors, including U.S. and foreign issues, with a
significant portion rated below investment grade. The Fund
will normally maintain a dollar-weighted average maturity
of between four and twelve years
INVESTOR PROFILE Investors seeking a high level of current income, and who
are willing to accept the risks of investing in fixed
income securities, including high-yield and foreign fixed
income securities
</TABLE>
PRINCIPAL INVESTMENT STRATEGIES
The Armada Strategic Income Bond Fund's investment objective is to provide
high current income by investing in three major sectors of fixed income
securities: domestic investment grade fixed income securities, domestic
high-yield fixed income securities and fixed income securities of issuers in
developed foreign countries. The types of fixed income securities in which the
Fund will invest include asset-backed securities, mortgage-backed securities and
obligations of corporate and U.S. Government issuers. Corporate obligations may
include bonds, notes and debentures issued by companies headquartered in the
U.S. or developed foreign countries. U.S. Government securities may include U.S.
Treasury obligations and obligations of certain U.S. Government agencies or
instrumentalities. High-yield fixed income securities are commonly referred to
as "junk bonds." The investment objective may be changed without a shareholder
vote. The Adviser allocates between 15% and 65% of the Fund's assets to each of
the three major sectors of fixed income securities based on its analysis of the
fixed income markets. Investment grade fixed income securities are those rated
in one of the four highest rating categories by a major rating agency, or
determined by the Adviser to be of equivalent quality. High-yield fixed income
securities are those rated below investment grade or are unrated and determined
by the Adviser to be equivalent to a non-investment grade security. The Fund
does not intend to invest in high-yield fixed income securities rated by
Standard & Poors, at the time of purchase, below C or are of equivalent quality.
If a security is downgraded below C, the Adviser will reevaluate whether
continuing to hold the security is in the best interest of shareholders.
In buying and selling particular securities for the Fund, the Adviser
considers a number of factors, including yield to maturity, maturity, quality
and the outlook for particular issuers, currencies and market sectors. The Fund
generally maintains a dollar-weighted average maturity of between four and
twelve years, however there is no limit on the maturity of any single security.
The portfolio will also make extensive use of derivative instruments and swaps.
Due to its investment strategy, the Fund may buy and sell securities
frequently. This may result in higher transaction costs and additional capital
gains tax liabilities and will lower Fund performance.
PRINCIPAL RISKS OF INVESTING
The prices of the Fund's fixed income securities respond to economic
developments, particularly interest rate changes, as well as to perceptions
about the creditworthiness of individual issuers, including
4
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governments. Generally, the Fund's fixed income securities will decrease in
value if interest rates rise and vice versa. Also, longer-term securities are
generally more volatile, so the average maturity or duration of these securities
affects risk.
High-yield bonds involve greater risks of default or downgrade and are more
volatile than investment grade securities. High-yield bonds involve greater risk
of price declines than investment grade securities due to actual or perceived
changes in an issuer's creditworthiness. In addition, issuers of high-yield
bonds may be more susceptible than other issuers to economic downturns.
High-yield bonds are subject to the risk that the issuer may not be able to pay
interest or dividends and ultimately to repay principal upon maturity.
Discontinuation of these payments could substantially adversely affect the
market value of the security.
Investing in foreign countries poses additional risks since political and
economic events unique to a country or region will affect those markets and
their issuers. These events will not necessarily affect the U.S. economy or
similar issuers located in the United States. In addition, investments in
foreign countries are generally denominated in a foreign currency. As a result,
changes in the value of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of the Fund's investments. These currency
movements may happen separately from and in response to events that do not
otherwise affect the value of the security in the issuer's home country.
An investment in the Fund is subject to interest rate risk, which is the
possibility that the Fund's yield will decline due to falling interest rates.
The Fund is also subject to debt extension risk. Debt extension risk is the
risk that an issuer will exercise its right to pay principal on an obligation
held by the Fund (such as an asset-backed security) later than expected. This
may happen during a period of rising interest rates. Under these circumstances,
the value of the obligation will decrease and the Fund will suffer from the
inability to invest in higher yielding securities.
The mortgages underlying mortgage-backed securities may be paid off early,
which makes it difficult to determine their actual maturity and therefore
calculate how they will respond to changes in interest rates. The Fund may have
to reinvest prepaid amounts at lower interest rates. This risk of prepayment is
an additional risk of mortgage-backed securities.
The Fund invests in leveraged instruments, such as futures and options
contracts. The more the Fund invests in these leveraged instruments, the greater
the possibility for gains or losses on those investments.
The Fund is also subject to the risk that any or all of its fixed income
market segments may underperform other segments of the fixed income market or
the fixed income markets as a whole. For additional information about risks, see
"More Information About Risk."
PERFORMANCE INFORMATION
There is no performance information for the Fund because it has not
completed a full calendar year of operations.
The performance of Class A, Class B, Class C and Class I Shares will differ
due to differences in expenses.
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FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)(1).................... 4.75% None None None
Maximum Deferred Sales Charge (Load) (as a percentage
of net asset value)................................. None 5.00%(2) 1.00%(3) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends and other Distributions (as a percentage
of offering price).................................. None None None None
Redemption Fee (as a percentage of amount redeemed, if
applicable)......................................... None None None None
Exchange Fee.......................................... None None None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Investment Advisory Fees........................... 0.55% 0.55% 0.55% 0.55%
Distribution and Service (12b-1) Fees.............. 0.10%(4) 0.75% 0.75% 0.10%(4)
Other Expenses..................................... 0.45%* 0.45%* 0.45%* 0.20%*
------ ------ ------ ------
Total Annual Fund Operating Expenses 1.10%(4) 1.75% 1.75% 0.85%(4)
</TABLE>
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* "Other Expenses" are based on estimated amounts for the current fiscal year.
(1) This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."
(2) This amount applies to redemptions during the first and second years. The
deferred sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the third through fifth years, respectively. No deferred sales charge
is charged after the fifth year. For more information see "Selling Fund
Shares."
(3) A contingent deferred sales charge is charged only with respect to Class C
Shares redeemed prior to eighteen months from the date of purchase.
(4) The Fund's total actual annual operating expenses for Class A and Class I
Shares will be less than the amounts shown above because the Distributor
will waive a portion of the fees in order to keep total operating expenses
for Class A and Class I Shares at a specified level. With these fee waivers,
the Fund's actual total operating expenses for Class A and Class I will be
1.04% and 0.79%, respectively. The Distributor may discontinue all or part
of these waivers at any time.
For more information about these fees, see "Investment Adviser and
Investment Team" and "Distribution of Fund Shares."
6
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EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of the period.
The Example also assumes that each year your investment has a 5% return,
Fund expenses remain the same and your Class B Shares convert to Class A Shares
after eight years. Although your actual costs and returns might be different,
your approximate costs of investing $10,000 in the Fund would be:
IF YOU SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
-------- --------
<S> <C> <C>
Class A Shares.............................................. $ 582 $ 808
Class B Shares.............................................. $ 678 $ 951
Class C Shares.............................................. $ 278 $ 551
Class I Shares.............................................. $ 87 $ 271
</TABLE>
IF YOU DO NOT SELL YOUR SHARES AT THE END OF THE PERIOD:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
-------- --------
<S> <C> <C>
Class B Shares.............................................. $ 178 $ 551
Class C Shares.............................................. $ 178 $ 551
</TABLE>
MORE INFORMATION ABOUT RISK
FIXED INCOME RISK--The market value of fixed income investments changes in
response to interest rate changes and other factors. During periods of falling
interest rates, the values of outstanding fixed income securities generally
rise. Moreover, while securities with longer maturities tend to produce higher
yields, the prices of longer maturity securities are also subject to greater
market fluctuations as a result of changes in interest rates. In addition to
these fundamental risks, different types of fixed income securities may be
subject to the following additional risks:
CALL RISK--During periods of falling interest rates, certain debt
obligations with high interest rates may be prepaid (or "called") by the
issuer prior to maturity. This may cause the Fund's average weighted
maturity to fluctuate, and may require the Fundto invest the resulting
proceeds at lower interest rates.
CREDIT RISK--The possibility that an issuer will be unable to make
timely payments of either principal or interest.
EVENT RISK--Securities may suffer declines in credit quality and market
value due to issuer restructurings or other factors. This risk should be
reduced because of thediversification provided by the Fund's multiple
holdings.
HIGH-YIELD, LOWER RATED SECURITIES (or "junk bonds") are subject to
additional risks associated with investing in high-yield securities,
including:
- High-yield, lower rated securities involve greater risk of default or
price declines than investments in investment grade securities (e.g.,
securities rated BBB or higher by Standard and Poor's Ratings
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Group ("S&P") or Baa or higher by Moody's Investors Service, Inc.
("Moody's")) due to changes in the issuer's creditworthiness.
- The market for high-yield, lower rated securities may be thinner and less
active, causing market price volatility and limited liquidity in the
secondary market. This may limit the ability of the Fund to sell these
securities at their fair market values either to meet redemption requests,
or in response to changes in the economy or the financial markets.
- Market prices for high-yield, lower rated securities may also be affected
by investors' perception of the issuer's credit quality and the outlook
for economic growth. Thus, prices for high-yield, lower rated securities
may move independently of interest rates and the overall bond market.
- The market for high-yield, lower rated securities may be adversely
affected by legislative and regulatory developments.
MORTGAGE-BACKED SECURITIES--Mortgage-backed securities are fixed income
securities representing an interest in a pool of underlying mortgage loans.
They are sensitive to changes in interest rates, but may respond to these
changes differently from other fixed income securities due to the
possibility of prepayment of the underlying mortgage loans. As a result, it
may not be possible to determine in advance the actual maturity date or
average life of a mortgage-backed security. Rising interest rates tend to
discourage refinancings, with the result that the average life and
volatility of the security will increase exacerbating its decrease in market
price. When interest rates fall, however, mortgage-backed securities may not
gain as much in market value because of the expectation of additional
mortgage prepayments that must be reinvested at lower interest rates.
Prepayment risk may make it difficult to calculate the average maturity of a
portfolio of mortgage-backed securities and, therefore, to assess the
volatility risk of that portfolio.
ASSET-BACKED SECURITIES RISK--Asset-backed securities are fixed income
securities representing an interest in a pool of shorter-term loans such as
automobile loans, home equity loans, equipment or computer leases or credit card
receivables. The payments from the loans are passed through to the security
holder. The loans underlying asset-backed securities tend to have prepayment
rates that do not vary with interest rates. In addition, the short-term nature
of the loans reduces the impact of any change in prepayment level. However, it
is possible that prepayments will alter the cash flow on asset-backed securities
and it is not possible to determine in advance the actual final maturity date or
average life. Faster prepayment will shorten the average life and slower
prepayment will lengthen it, affecting the price volatility of the security.
However, it is possible to determine what the range of that movement could be
and to calculate the effect that it will have on the price of the security.
FOREIGN SECURITY RISKS--Investments in securities of foreign companies can
be more volatile than investments in U.S. companies. Diplomatic, political, or
economic developments, including nationalization or appropriation, could affect
investments in foreign countries. Foreign securities markets generally have less
trading volume and less liquidity than U.S. markets. In addition, the value of
securities denominated in foreign currencies, and of dividends from such
securities, can change significantly when foreign currencies strengthen or
weaken relative to the U.S. dollar. Foreign companies generally are not subject
to uniform accounting, auditing, and financial reporting standards comparable to
those applicable to domestic U.S. companies. Transaction costs are generally
higher than those in the U.S. and expenses for custodial arrangements of foreign
securities may be somewhat greater than typical expenses for custodial
arrangements of similar U.S. securities. Some foreign governments levy
withholding taxes against dividend and interest income. Although in some
countries a portion of these taxes are recoverable, the non-recovered portion
will reduce the income received from the securities comprising the portfolio.
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In addition to these risks, certain foreign securities may be subject to the
following additional risk factors:
CURRENCY RISK--Investments in foreign securities denominated in foreign
currencies involve additional risks, including:
- The value of the Fund's assets measured in U.S. dollars may be affected by
changes in currency rates and in exchange control regulations.
- The Fund may incur substantial costs in connection with conversions
between various currencies.
- The Fund may be unable to hedge against possible variations in foreign
exchange rates or to hedge a specific security transaction or portfolio
position.
HEDGING RISK--Hedging is a strategy designed to offset investment risks.
Hedging activities include, among other things, the use of forwards, options
and futures. There are risks associated with hedging activities, including:
- The success of a hedging strategy may depend on an ability to predict
movements in the prices of individual securities, fluctuations in markets,
and movements in interest and currency exchange rates.
- There may be an imperfect or no correlation between the changes in market
value of the securities held by the Fund or the currencies in which those
securities are denominated and the prices of forward contracts, futures
and options on futures.
- There may not be a liquid secondary market for a futures contract or
option.
- Trading restrictions or limitations may be imposed by an exchange, and
government regulations may restrict trading in currencies, futures
contracts and options.
LEVERAGING RISK--Leveraging activities include, among other things,
borrowing and the use of short sales, options and futures. There are risks
associated with leveraging activities, including:
- The Fund experiencing losses over certain ranges in the market that exceed
losses experienced by a non-leveraged fund.
- There may be an imperfect or no correlation between the changes in market
value of the securities held by the Fund and the prices of futures and
options on futures.
- Although the Fund will only purchase exchange-traded futures and options,
due to market conditions there may not be a liquid secondary market for a
futures contract or option. As a result, the Fund may be unable to close
out its futures or options contracts at a time which is advantageous.
- Trading restrictions or limitations may be imposed by an exchange, and
government regulations may restrict trading in futures contracts and
options.
In addition, the following leveraged instruments are subject to certain
specific risks:
DERIVATIVES RISK--The Fund uses derivatives to attempt to achieve its
investment objective, while at the same time maintaining liquidity. To
collateralize (or cover) these derivatives transactions, the Fund holds
cash, U.S. Government securities, or other securities which the investment
management team deems appropriate to cover expected payments owed on
derivative contracts.
FUTURES--Futures contracts and options on futures contracts provide for
the future sale by one party and purchase by another party of a specified
amount of a specific security at a specified future time and at a specified
price. An option on a futures contract gives the purchaser the right, in
exchange for a premium, to assume a position in a futures contract at a
specified exercise price during the term of the option. Index futures are
futures contracts for various indices that are traded on registered
securities exchanges.
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The Fund may use futures contracts and related options for bona fide hedging
purposes to offset changes in the value of securities held or expected to be
acquired. They may also be used to gain exposure to a particular market or
instrument, to create a synthetic money market position, and for certain other
tax-related purposes. The Fund will only enter into futures contracts traded on
a national futures exchange or board of trade.
OPTIONS--The buyer of an option acquires the right to buy (a call
option) or sell (a put option) a certain quantity of a security (the
underlying security) or instrument at a certain price up to a specified
point in time. The seller or writer of an option is obligated to sell (a
call option) or buy (a put option) the underlying security. When writing
(selling) call options on securities, the Fund may cover its position by
owning the underlying security on which the option is written or by owning a
call option on the underlying security. Alternatively, the Fund may cover
its position by maintaining in a segregated account cash or liquid
securities equal in value to the exercise price of the call option written
by the Fund.
Because option premiums paid or received by the Fund are small in
relation to the market value of the investments underlying the options,
buying and selling put and call options can be more speculative than
investing directly in securities.
THE FUND'S OTHER INVESTMENTS
In addition to the investments and strategies described in this prospectus,
the Fund also may invest in other securities, use other strategies and engage in
other investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information. Of course, the Trust cannot guarantee that the Fund will
achieve its investment goal.
The investments and strategies described in this prospectus are those that
we use under normal conditions. During unusual economic, market, political or
other conditions, or for temporary defensive or liquidity purposes, the Fund may
invest up to 100% of its assets in short-term high quality debt instruments that
would not ordinarily be consistent with the Fund's principal investment
strategies. The Fund will do so only if the Adviser believes that the risk of
loss outweighs the opportunity for achieving the Fund's investment objective.
INVESTMENT ADVISER AND INVESTMENT TEAM
The Investment Adviser makes investment decisions for the Fund and
continuously reviews, supervises and administers the Fund's investment program.
The Board of Trustees of the Trust supervises the Adviser and establishes
policies that the Adviser must follow in its management activities.
National City Investment Management Company ("IMC"), with its principal
offices at 1900 East Ninth Street, Cleveland, Ohio 44114, serves as Adviser to
the Fund. On June 30, 2000, IMC had approximately $25.55 billion in assets under
management.
IMC utilizes a team approach for management of the Fund. The Taxable Fixed
Income Team and the International Equity Team are jointly responsible for the
day-to-day management of the Fund. No one person is primarily responsible for
making investment recommendations to the team.
THE ADVISER'S PAST PERFORMANCE
Since November 1, 1996, the Adviser has managed some assets as part of a
larger portfolio of a retirement trust, the National City Non-Contributory
Retirement Trust-Strategic Income (the "Retirement Trust Assets"). These assets
are managed by the Adviser using policies and strategies similar to, though not
always identical to, those used by the Adviser to manage the Fund. A composite
of the performance of these assets is listed below. The performance data for
these assets does not reflect the deduction for fees
10
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and expenses. If the performance was adjusted to reflect the fees and expenses
of the Fund, the composite's performance would be lower. Also listed below are
two indices. The indices used in the comparison are unmanaged indices which
assume the reinvestment of dividends on securities in the index, and are
generally considered to be representative of securities similar to those
invested in by the Adviser for the purpose of the composite performance numbers
set forth below.
The assets managed by the Adviser are not subject to the investment
limitations, diversification requirements and other restrictions imposed by the
Investment Company Act of 1940, as amended (the "1940 Act"), and the Internal
Revenue Code. If they were, their returns might have been lower. The performance
of these assets is not intended to predict or suggest the performance of the
Fund, but rather to provide the shareholder with information about the
historical investment performance of the Fund's Adviser.
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION
(ENDED 6/30/00) (NOVEMBER 1, 1996)
--------------- ------------------
<S> <C> <C>
Retirement Trust Assets..................................... 0.30% 4.26%
Lehman Aggregate Bond Index(1).............................. 4.56% 6.01%
Lehman High-Yield Index(2).................................. -1.03% 4.94%
Lehman G-7 Index (ex-U.S.)(3)............................... 3.09% 2.44%
Hybrid Index(4)............................................. 2.28% 4.56%
</TABLE>
------------------------
(1) The Lehman Aggregate Bond Index is an unmanaged, fixed income, market
value-weighted index that includes treasury issues, agency issues, corporate
bond issues and mortgage-backed securities.
(2) The Lehman High-Yield Index is an unmanaged, market value-weighed index that
tracks the daily price-only, coupon and total return performance of
noninvestment grade, fixed rate, publicly placed, dollar-denominated and
nonconvertible debt registered with the U.S. Securities and Exchange
Commission.
(3) The Lehman G-7 Index (ex-U.S.) is a sub-group of the Lehman Global Treasury
Index which tracks fixed-rate, non-convertible, local currency and ECU
denominated sovereign debt issues which have at least one year remaining to
maturity. The Lehman G-7 (ex-U.S.) Index is geographically limited to the
"G-7" group of industrialized countries, excluding the United States
(Canada, Germany, France, Italy, Japan, and the United Kingdom). The country
components are weighted according to market capitalization.
(4) The Hybrid Index is an index composed of one-third of each index listed
above.
PURCHASING, SELLING AND EXCHANGING FUND SHARES
This section tells you how to purchase, sell (sometimes called "redeem") or
exchange Class A, Class B, Class C and Class I Shares of the Fund.
The classes have different expenses and other characteristics.
CLASS A SHARES
- Front-end sales charge
- 12b-1 fees
- $500 minimum initial investment--no subsequent minimum
CLASS B SHARES
- Contingent deferred sales charge
- Higher 12b-1 fees
- $500 minimum initial investment--no subsequent minimum
11
<PAGE>
CLASS C SHARES
- Contingent deferred sales charge
- Higher 12b-1 fees
- $500 minimum initial investment--no subsequent minimum
CLASS I SHARES
- No sales charge
- 12b-1 fees
- No minimum investment amount--no subsequent minimum
- Only available through authorized institutions
For investors purchasing shares through a Planned Investment Program, the
minimum initial investment is $50.
Class A and Class B Shares are for individual, corporate investors and
retirement plans. Class C Shares are for individual investors and retirement
plans. Class I Shares are for financial institutions investing for their own or
their customers' accounts. For information on how to open an account and set up
procedures for placing transactions call 1-800-622-FUND (3863).
HOW TO PURCHASE INSTITUTIONAL CLASS SHARES
You may buy Institutional Class Shares through accounts with brokers and
other institutions that are authorized to place trades in Fund shares for their
customers. If you invest through an authorized institution, you will have to
follow its procedures. Your institution may charge a fee for its services, in
addition to the fees charged by the Trust. You will also generally have to
address your correspondence or questions regarding a Fund to your institution.
HOW TO PURCHASE RETAIL SHARES
You may purchase shares directly by:
- Mail
- Telephone
- Internet
- Wire or
- Automated Clearing House (ACH)
To purchase shares directly from us, please call 1-800-622-FUND (3863), log
on to our website at WWW.ARMADAFUNDS.COM, or complete and send in the enclosed
application. Unless you arrange to pay by wire or ACH, write your check, payable
in U.S. dollars, to "Armada Funds (Fund name)." The Trust cannot accept
third-party checks, credit cards, credit card checks or cash.
To purchase shares by wire, call 1-800-622-FUND (3863) to set up your
account to accommodate wire transactions. To initiate your wire transaction,
call your depository institution. Federal funds (monies
12
<PAGE>
transferred from one bank to another through the Federal Reserve system with
same-day availability) should be wired to:
State Street Bank and Trust Company
ABA #011000028
Account
(Account Registration)
(Account Number)
(Wire Control Number) *See Below*
Prior to sending wires, please be sure to call 1-800-622-FUND (3863) to
receive a wire control number to be included in the body of the wire (see
above).
Note: Your bank may charge you a fee for this service.
BUYING OR SELLING RETAIL SHARES THROUGH A FINANCIAL INTERMEDIARY
You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for their customers. If you
invest through an authorized institution, you will have to follow its
procedures. Your institution may charge a fee for its services, in addition to
the fees charged by the Trust. You will also generally have to address your
correspondence or questions regarding the Fund to your institution.
Your investment representative is responsible for transmitting all
subscription and redemption requests, investment information, documentation and
money to the Fund on time. Certain investment representatives have agreements
with the Fund that allow them to enter confirmed purchase or redemption orders
on behalf of clients and customers. Under this arrangement, the investment
representative must send your payment to the Fund by the time it prices its
shares on the following day. If your investment representative fails to do so,
it may be responsible for any resulting fees or losses.
GENERAL INFORMATION
You may purchase shares on any day that the New York Stock Exchange is open
for business (a "Business Day").
The Trust may reject any purchase or redemption order if it is determined
that accepting the order would not be in the best interests of the Fund or its
shareholders.
The price per share (the offering price) will be the net asset value per
share (NAV) next determined after the Fund receives your purchase order plus, in
the case of Class A Shares, the applicable front-end sales charge. The NAV per
share of the Fund is calculated each Business Day at 4:00 p.m. (Eastern Time),
the regularly-scheduled close of normal trading on the New York Stock Exchange.
So, for you to be eligible to receive dividends declared on the day you
submit your purchase order, generally the Fund must receive your order before
4:00 p.m. (Eastern Time) and federal funds (readily available funds) before
2:00 p.m. (Eastern Time) the following day.
HOW WE CALCULATE NAV
NAV for one Fund share is the value of that share's portion of all of the
net assets in the Fund less liabilities and class expenses.
In calculating NAV, the Fund generally values its investment portfolio at
market price. In the event that a sale of a particular fixed income security is
not reported for that day, fixed income securities are priced at the mean
between the most recent quoted bid and asked prices. Unlisted securities and
securities traded on a national securities market for which market quotations
are readily available are valued at the mean between the most recent bid and
asked prices. If market prices are unavailable or the Fund thinks
13
<PAGE>
that they are unreliable, fair value prices may be determined in good faith
using methods approved by the Board of Trustees.
The Fund may hold securities that are listed on foreign exchanges. These
securities may trade on weekends or other days when the Fund does not calculate
NAV. As a result, the market value of this Fund's investments may change on days
when you cannot buy and hold shares of the Fund.
PLANNED INVESTMENT PROGRAM
If you have a checking or savings account with a bank, you may purchase
Class A, Class B or Class C Shares automatically through regular deductions from
your account in amounts of at least $50 per month.
With a $50 minimum initial investment, you may begin regularly scheduled
investments on a monthly or quarterly basis.
SALES CHARGES
FRONT-END SALES CHARGES--CLASS A SHARES
The offering price of Class A Shares is the NAV next calculated after the
Fund receives your request, plus the front-end sales load.
The amount of any front-end sales charge included in your offering price
varies, depending on the amount of your investment:
<TABLE>
<CAPTION>
SALES CHARGE AS A % OF DEALERS' REALLOWANCE
OFFERING PRICE PER AS A % OF NET ASSET AS A % OF OFFERING
IF YOUR INVESTMENT IS: SHARE VALUE PER SHARE PRICE PER SHARE
---------------------- ---------------------- ------------------- --------------------
<S> <C> <C> <C>
Less than $50,000...................... 4.75 5.00 4.50
$50,000 but less than $100,000......... 4.00 4.20 3.75
$100,000 but less than $250,000........ 3.75 3.90 3.50
$250,000 but less than $500,000........ 2.50 2.80 2.25
$500,000 but less than $1,000,000...... 2.00 2.00 1.75
$1,000,000 or more..................... 0.00 0.00 0.00
</TABLE>
With respect to purchases of $1,000,000 or more of the Fund, the Adviser may
pay from its own funds a fee of 1% of the amount invested to the financial
institution placing the purchase order. A 1% sales charge will be assessed
against a shareholder's fund account if its value falls below $1,000,000 due to
a redemption by the shareholder within the first year following the initial
investment of $1,000,000 or more.
WAIVER OF FRONT-END SALES CHARGE--CLASS A SHARES
The front-end sales charge will be waived on Class A Shares purchased:
- by Trustees and Officers of the Trust and their immediate families
(spouse, parents, siblings, children and grandchildren);
- by directors and retired directors of National City Corporation (NCC) or
any of its affiliates and their immediate families, employees and retired
employees of NCC or any of its affiliates and their immediate families and
participants in employee benefit/retirement plans of NCC or any of its
affiliates and their immediate families;
- by direct transfer of rollover from a qualified plan for which affiliates
of NCC serve as trustee or agent (or certain institutions having
relationships with affiliates of NCC);
- by investors purchasing through payroll deduction, investors in Armada
Plus account through NCC's Retirement Plan Services or investors investing
though "one stop" networks;
- by orders placed by qualified broker-dealers, investment advisers or
financial planners who charge a management fee for their services and
place trades for their own account or accounts of clients.
14
<PAGE>
REPURCHASE OF CLASS A SHARES
You may repurchase any amount of Class A Shares of the Fund at NAV without
the normal front-end sales charge, up to the limit of the value of any amount of
Class A Shares (other than those which were purchased with reinvested dividends
and distributions) that you redeemed within the past 180 days. In effect, this
allows you to reacquire shares that you may have had to redeem, without
re-paying the front-end sales charge. To exercise this privilege, the Fund must
receive your purchase order within 180 days of your redemption. IN ADDITION, YOU
MUST NOTIFY THE FUND WHEN YOU SEND IN YOUR PURCHASE ORDER THAT YOU ARE
REPURCHASING SHARES AND WOULD LIKE TO EXERCISE THIS OPTION.
REDUCED SALES CHARGES--CLASS A SHARES
RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this
right allows you to add the value of the Class A Shares you already own to the
amount that you are currently purchasing. The Fund will combine the value of
your current purchases with the current value of any Class A Shares you
purchased previously for (i) your account, (ii) your spouse's account, (iii) a
joint account with your spouse, or (iv) your minor children's trust or custodial
accounts. A fiduciary purchasing shares for the same fiduciary account, trust or
estate may also use this right of accumulation. The Fund will only consider the
value of Class A Shares purchased previously that were sold subject to a sales
charge. TO BE ENTITLED TO A REDUCED SALES CHARGE BASED ON SHARES ALREADY OWNED,
YOU MUST ASK US FOR THE REDUCTION AT THE TIME OF PURCHASE. You must provide the
Fund with your account number(s) and, if applicable, the account numbers for
your spouse and/or children (and provide the children's ages). The Fund may
amend or terminate this right of accumulation at any time.
LETTER OF INTENT. You may purchase Class A Shares at the sales charge rate
applicable to the total amount of the purchases you intend to make over a
13-month period. In other words, a Letter of Intent allows you to purchase
Class A Shares of the Fund over a 13-month period and receive the same sales
charge as if you had purchased all the shares at the same time. The Fund will
only consider the value of Class A Shares sold subject to a sales charge. As a
result, Class A Shares purchased with dividends or distributions will not be
included in the calculation. To be entitled to a reduced sales charge based on
shares you intend to purchase over the 13-month period, you must send the Fund a
Letter of Intent. In calculating the total amount of purchases you may include
in your letter purchases made up to 90 days before the date of the Letter. The
13-month period begins on the date of the first purchase, including those
purchases made in the 90-day period before the date of the Letter. Please note
that the purchase price of these prior purchases will not be adjusted.
If you do not purchase the amount of shares indicated in the Letter, the
Letter authorizes the Fund to hold in escrow 4% of the total amount you intend
to purchase. If you do not complete the total intended purchase at the end of
the 13-month period or you redeem the entire amount within one year from the
time of fulfillment, the Fund's transfer agent will redeem the necessary portion
of the escrowed shares to make up the difference between the reduced rate sales
charge (based on the amount you intended to purchase) and the sales charge that
would normally apply (based on the actual amount you purchased).
COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate
sales charge rate, the Fund will combine same day purchases of Class A Shares
(that are subject to a sales charge) made by you, your spouse and your minor
children (under age 21). This combination also applies to Class A Shares you
purchase with a Letter of Intent. YOU MUST NOTIFY THE FUND OF THE PURCHASES THAT
QUALIFY FOR THIS DISCOUNT.
15
<PAGE>
CONTINGENT DEFERRED SALES CHARGES--CLASS B AND CLASS C SHARES
You do not pay a sales charge when you purchase Class B or Class C Shares.
The offering price of Class B and Class C Shares is simply the next calculated
NAV. But if you sell your Class B Shares within five years after your purchase
or your Class C Shares within eighteen months of purchase, you will pay a
contingent deferred sales charge as described in the table below for Class B
Shares or 1.00% for Class C Shares on either (1) the NAV of the shares at the
time of purchase, or (2) NAV of the shares next calculated after the Fund
receives your sale request in good order, whichever is less. The sales charge
does not apply to shares you purchase through reinvestment of dividends or
distributions. So, you never pay a deferred sales charge on any increase in your
investment above the initial offering price. This sales charge does not apply to
exchanges of Class B Shares of one Fund for Class B Shares of another Fund or to
exchanges of Class C Shares of one Fund for Class C Shares of another Fund.
After eight years, your Class B Shares are converted to Class A Shares. There is
no conversion feature for Class C Shares.
<TABLE>
<CAPTION>
CLASS B SHARES
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- --------------------------------
<S> <C>
First....................................................... 5.0%
Second...................................................... 5.0%
Third....................................................... 4.0%
Fourth...................................................... 3.0%
Fifth....................................................... 2.0%
Sixth....................................................... None
Seventh..................................................... None
Eighth...................................................... None
</TABLE>
When an investor redeems his or her Class B Shares, the redemption order is
processed to minimize the amount of the contingent deferred sales charge that
will be charged. Class B Shares are redeemed first from those Class B Shares
that are not subject to the deferred sales load (i.e. Class B Shares that were
acquired through reinvestment of dividends or capital gain distributions) and
thereafter, unless otherwise designated by the shareholder, from the Class B
Shares that have been held the longest.
The contingent deferred sales charge will be waived if you sell your
Class B or Class C Shares for the following reasons:
- redemptions following the death or disability of a shareholder;
- redemptions representing a minimum required distribution from an IRA or a
custodial account to a shareholder who has reached 70 1/2 years of age;
- minimum required distributions from an IRA or a custodial account to a
shareholder who has died or become disabled;
- redemptions by participants in a qualified plan for retirement loans,
financial hardship, certain participant expenses and redemptions due to
termination of employment with plan sponsor;
- redemptions by a settlor of a living trust;
- redemptions effected pursuant to the Fund's right to liquidate a
shareholder's account if the value of shares held in the account is less
than the minimum account size;
- return of excess contributions;
- redemptions following the death or disability of both shareholders in the
case of joint accounts;
- exchanges of Class B or Class C Shares between Class B or Class C Shares
of the other funds, respectively, of the Trust; and
- distributions of less than 10% of the annual account value under a
Systematic Withdrawal Plan.
16
<PAGE>
GENERAL INFORMATION ABOUT SALES CHARGES--CLASS A, CLASS B AND CLASS C SHARES
Your securities dealer is paid a commission when you buy Class A Shares and
is paid a servicing fee. Your securities dealer is paid a commission when you
buy Class B or Class C Shares and is paid a servicing fee after 12 months and
then as long as you hold your shares. Your securities dealer or servicing agent
may receive different levels of compensation depending on which Class of shares
you buy.
From time to time, some financial institutions may be reallowed up to the
entire sales charge. Firms that receive a reallowance of the entire sales charge
may be considered underwriters for the purpose of federal securities law.
HOW TO SELL YOUR INSTITUTIONAL CLASS SHARES
Holders of Institutional Class Shares may sell shares by following
procedures established when they opened their account or accounts. If you have
questions, call 1-800-622-FUND (3863).
If you own your shares through an account with a broker or other
institution, contact that broker or institution to sell your shares.
The sale price of each share will be the next NAV determined after the Fund
receives your request.
HOW TO SELL YOUR RETAIL SHARES
Holders of Class A, Class B or Class C Shares may sell shares by following
procedures established when they opened their account or accounts. If you have
questions, call 1-800-622-FUND (3863).
If you own your shares directly, you may sell (sometimes called "redeem")
your shares on any Business Day by contacting the Fund directly by mail, by
Internet at www.armadafunds.com or by telephone at 1-800-622-FUND (3863). The
minimum amount for telephone and Internet redemptions is $100.
If you own your shares through an account with a broker or other
institution, contact that broker or institution to sell your shares. Your broker
or institution may charge a fee for its services, in addition to the fees
charged by the Fund.
If you would like to sell $100,000 or more of your shares, please notify the
Fund in writing and include a signature guarantee by a bank or other financial
institution (a notarized signature is not sufficient).
The sale price of each share for redemption requests received in good order
by the Fund will be the next NAV determined less, in the case of Class B and
Class C Shares, any applicable deferred sales charge. Good order means that your
request includes complete information and legal requirements on your purchase,
exchange or redemption and that the Fund has received the appropriate assets.
When an Investor redeems his or her Class B Shares, the redemption order is
processed to minimize the amount of the contingent deferred sales charge that
will be charged. Class B Shares are redeemed first from those Class B Shares
that are not subject to the deferred sales load (i.e., Class B Shares that were
acquired through reinvestment of dividends or capital gain distributions) and
thereafter, unless otherwise designated by the shareholder, from the Class B
Shares that have been held the longest.
SYSTEMATIC WITHDRAWAL PLAN
If you hold Class A, Class B or Class C Shares and have at least $1,000 in
your account, you may use the Systematic Withdrawal Plan. Under the plan you may
arrange monthly, quarterly, semi-annual or annual automatic withdrawals of at
least $100 from the Fund. The proceeds of each withdrawal will be mailed to you
by check or, if you have a checking or savings account with a bank,
electronically transferred to your account. There will be no deferred sales
charge on systematic withdrawals made on Class B or Class C Shares, as long as
the amounts withdrawn do not exceed 10% annually of the account balance.
17
<PAGE>
INVOLUNTARY SALE OF YOUR SHARES
If you hold Class A, Class B or Class C Shares and your account balance
drops below $500 because of redemptions, you may be required to sell your
shares. But, we will always give you at least 60 days' written notice to give
you time to add to your account and avoid the sale of your shares.
ADDITIONAL SALES INFORMATION--RETAIL SHARES AND INSTITUTIONAL SHARES
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within seven days after we receive
your request. Your proceeds can be wired to your bank account or sent to you by
check. The Trust does not charge a fee to wire your funds; however, your
institution may charge a fee. IF YOU RECENTLY PURCHASED YOUR SHARES BY CHECK OR
THROUGH ACH, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK HAS
CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE).
REDEMPTIONS IN KIND
We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Fund's remaining shareholders) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). It is highly unlikely that your shares would ever be
redeemed in kind, but if they were you would probably have to pay transaction
costs to sell the securities distributed to you, as well as taxes on any capital
gains from the sale as with any redemption.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
The Fund may suspend your right to sell your shares if the New York Stock
Exchange restricts trading, the SEC declares an emergency or for other reasons.
More information about this is in our Statement of Additional Information.
HOW TO EXCHANGE YOUR SHARES
If you hold Class A, Class B or Class C Shares you may exchange your shares
on any Business Day by contacting us directly by mail, Internet or telephone.
You may also exchange shares through your financial institution by mail or
telephone. Requests to exchange into a new fund must be for an amount of at
least $500.
The exchange privilege is a convenient way to respond to changes in
investment goals or in market conditions. This privilege is not designed for
market-timing--switching money into investments in anticipation of rising prices
or taking money out in anticipation of the market falling. As money is shifted
in and out, the Fund incurs expenses for buying and selling securities. These
costs are borne by all Fund shareholders, including the long-term investors who
do not generate the costs. Therefore, the Fund discourages short-term trading
by, among other things, limiting the number of exchanges to one exchange every
two months during a given 12-month period beginning upon the date of the first
exchange transaction. Management of the Trust reserves the right to limit, amend
or impose charges upon, terminate or otherwise modify the exchange privilege.
You will be provided 60 days' notice before any material action is taken.
IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH, YOU MAY NOT BE
ABLE TO EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO
15 DAYS FROM YOUR DATE OF PURCHASE).
When you exchange shares, you are really selling your shares and buying
shares of other funds offered by the Trust. So, your sale price and purchase
price will be based on the NAV next calculated after the Fund receives your
exchange request.
18
<PAGE>
CLASS A SHARES
You may exchange Class A Shares of the Fund for Class A Shares of any other
fund offered by the Trust. If you exchange shares that you purchased without a
sales charge or with a lower sales charge into a fund with a sales charge or
with a higher sales charge, the exchange is subject to an incremental sales
charge (e.g., the difference between the lower and higher applicable sales
charges). If you exchange shares into a fund with the same, lower or no sales
charge there is no incremental sales charge for the exchange in this manner.
CLASS B SHARES
You may exchange Class B Shares of the Fund for Class B Shares of any other
fund offered by the Trust. No contingent deferred sales charge is imposed on
redemptions of shares you acquire in an exchange, provided you hold your shares
for at least five years from your initial purchase.
CLASS C SHARES
You may exchange Class C Shares of the Fund for Class C Shares of any other
fund offered by the Trust. No contingent deferred sales charge is imposed on
redemptions of shares you acquire in an exchange in this manner.
TELEPHONE AND INTERNET TRANSACTIONS
Purchasing, selling and exchanging Fund shares over the telephone or via the
Internet is extremely convenient, but not without risk. Although the Trust has
certain safeguards and procedures to confirm the authenticity of instructions,
the Trust is not responsible for any losses or costs incurred by following
telephone or Internet instructions we reasonably believe to be genuine. If you
or your financial institution transact with the Fund over the telephone or via
the Internet, you will generally bear the risk of any loss.
DISTRIBUTION OF FUND SHARES
The Fund has adopted a distribution plan under Rule 12b-1, pursuant to the
1940 Act, that allows the Fund to pay distribution and service fees for the sale
and distribution of its shares, and for services provided to shareholders.
Because these fees are paid out of the Fund's assets continuously, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
Distribution fees, as a percentage of average daily net assets are as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS I
---------- -------- -------- ----------
<S> <C> <C> <C>
0.04%(1,2) 0.75%(1) 0.75%(1) 0.04%(1,2)
</TABLE>
------------------------
(1) As of the date of this Prospectus, the Strategic Income Bond Fund had not
yet commenced operations. The amounts indicated are the distribution fees
the Fund intends to charge upon start up of operations.
(2) The Fund is eligible to charge up to 0.10% for distribution fees on Class A
and Class I shares.
The Distributor may, from time to time in its sole discretion, institute one
or more promotional incentive programs for dealers, which will be paid for by
the Distributor from any sales charge it receives or from any other source
available to it. Under any such program, the Distributor may provide incentives,
in the form of cash or other compensation, including merchandise, airline
vouchers, trips and vacation packages, to dealers selling shares of the Fund.
19
<PAGE>
DIVIDENDS AND TAXES
The Fund will distribute its income monthly. The Fund makes distributions of
capital gains, if any, at least annually. If you own Fund shares on the Fund's
record date, you will be entitled to receive the distribution.
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Fund in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the Fund
receives your written notice. To cancel your election, simply send the Fund
written notice.
FEDERAL TAXES
The Fund contemplates declaring as dividends each year all or substantially
all of its taxable income, including its net capital gain (the excess of
long-term capital gain over short-term capital loss). Distributions attributable
to the net capital gain of the Fund will be taxable to you as long-term capital
gain, regardless of how long you have held your shares. Other Fund distributions
will generally be taxable as ordinary income. You will be subject to income tax
on Fund distributions regardless of whether they are paid in cash or reinvested
in additional shares. You will be notified annually of the tax status of
distributions to you.
You should note that if you purchase shares just before a distribution, the
purchase price will reflect the amount of the upcoming distribution, but you
will be taxable on the entire amount of the distribution received, even though,
as an economic matter, the distribution simply constitutes a return of capital.
This is known as "buying into a dividend."
You will recognize taxable gain or loss on a sale, exchange or redemption of
your shares, including an exchange for shares of another Fund (or an in-kind
redemption), based on the difference between your tax basis in the shares and
the amount you receive for them. (To aid in computing your tax basis, you
generally should retain your account statements for the periods during which you
held shares.) Any loss realized on shares held for six months or less will be
treated as a long-term capital loss to the extent of any capital gain dividends
that were received on the shares.
The one major exception to these tax principles is that distributions on,
and sales, exchanges and redemptions of, shares held in an IRA (or other
tax-qualified plan) will not be currently taxable.
The Fund's investment in foreign securities may be subject to foreign
withholding taxes which may reduce the Fund's yield. The Fund may be able to
pass along a tax credit for foreign income taxes it pays. The Fund will notify
you if it gives you the credit.
The foregoing is only a summary of certain tax considerations under current
law, which may be subject to change in the future. Shareholders who are
nonresident aliens, foreign trusts or estates, or foreign corporations or
partnerships, may be subject to different United States federal income tax
treatment. You should consult your tax adviser for further information regarding
federal, state, local and/or foreign tax consequences relevant to your specific
situation.
STATE AND LOCAL TAXES
Shareowners may also be subject to state and local taxes on distributions
and redemptions. State income taxes may not apply, however, to the portions of
the Fund's distributions, if any, that are attributable to interest on
securities issued by the U.S. Government and its agencies and instrumentalities
or interest on securities of the particular state or localities within the
state. Shareowners should consult their tax advisers regarding the tax status of
distributions in their state and locality.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
20
<PAGE>
ARMADA FUNDS
INVESTMENT ADVISER
National City Investment Management Company
1900 East Ninth Street
Cleveland, Ohio 44114
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
LEGAL COUNSEL
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103-6996
More information about the Fund is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI, as it may be amended or supplemented from time to time, includes
more detailed information about the Armada Funds. The SAI is on file with the
SEC and is incorporated by reference into this prospectus. This means that the
SAI, for legal purposes, is a part of this prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list the Fund's holdings and contain information from the
Fund's managers about strategies, and recent market conditions and trends and
their impact on Fund performance. The reports also contain detailed financial
information about the Fund.
TO OBTAIN AN SAI , ANNUAL OR SEMI-ANNUAL REPORT, OR MORE INFORMATION:
BY TELEPHONE: Call 1-800-622-FUND (3863)
BY MAIL:
P.O. Box 8421
Boston, MA 02266-8421
BY INTERNET: www.armadafunds.com
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about the Armada Funds, from the EDGAR Database on
the SEC's website
(http://www.sec.gov). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information on the operation of the Public
Reference Room, call 202-942-8090). You may request documents by mail from the
SEC, upon payment of a duplicating fee, by writing to: Securities and Exchange
Commission, Public Reference Section, Washington, DC 20549-0102. You may also
obtain this information, upon payment of a duplicating fee, by e-mailing the SEC
at the following address: [email protected].
The Armada Fund's Investment Company Act registration number is 811-4416.
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ARMADA FUNDS
STATEMENT OF ADDITIONAL INFORMATION
______________, 2000
STRATEGIC INCOME BOND FUND
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the current Prospectus for the Strategic Income Bond Fund of
Armada Funds (the "Trust"), dated _______, 2000 for Class A, Class B, Class C
and Class I Shares of the Fund, as such Prospectus may be amended or
supplemented from time to time. A copy of the Prospectus may be obtained by
calling or writing the Trust at 1-800-622-FUND (3863), One Freedom Valley Drive,
Oaks, Pennsylvania 19456.
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TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION..............................................................................1
INVESTMENT OBJECTIVE AND POLICIES................................................................................1
INVESTMENT LIMITATIONS..........................................................................................23
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..................................................................25
DESCRIPTION OF SHARES...........................................................................................27
ADDITIONAL INFORMATION CONCERNING TAXES.........................................................................32
TRUSTEES AND OFFICERS...........................................................................................33
ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN SERVICES AND TRANSFER AGENCY AGREEMENTS.......................38
SHAREHOLDER SERVICES PLANS......................................................................................42
PORTFOLIO TRANSACTIONS..........................................................................................43
AUDITORS........................................................................................................44
COUNSEL.........................................................................................................44
YIELD AND PERFORMANCE INFORMATION...............................................................................44
CODES OF ETHICS.................................................................................................47
MISCELLANEOUS...................................................................................................47
APPENDIX A.....................................................................................................A-1
APPENDIX B.....................................................................................................B-1
</TABLE>
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STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read in conjunction with
the Prospectus that describes the Strategic Income Bond Fund (the "Fund"). The
information contained in this Statement of Additional Information expands upon
matters discussed in the Prospectus. No investment in shares of the Fund should
be made without first reading the Prospectus for the Fund.
The Trust was organized as a Massachusetts business trust on January 28,
1986. The Trust is a series fund authorized to issue separate classes or series
of shares of beneficial interest.
INVESTMENT OBJECTIVE AND POLICIES
ADDITIONAL INFORMATION ABOUT FUND MANAGEMENT
Further information on the management strategies, techniques, policies and
related matters concerning National City Investment Management Company ("IMC" or
the "Adviser") may be included from time to time in advertisements, sales
literature, communications to shareholders and other materials. See also, "Yield
and Performance Information" below.
ADDITIONAL INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the principal strategies and risk disclosure relating to the Fund in its
Prospectus.
The Fund will normally allocate between 15% and 65% of its assets in
each of the following three types of fixed income securities: domestic
investment grade fixed income securities, domestic high-yield fixed income
securities, and fixed income securities of issuers in developed foreign
countries, based on the Adviser's analysis of the fixed income markets.
Investment grade fixed income securities are those rated in one of the four
highest rating categories by a major rating agency, or determined by the
Adviser to be of equivalent quality. High-yield fixed income securities are
those rated below investment grade. Under normal market conditions, the Fund
maintains an average dollar-weighted portfolio maturity of four to twelve
years.
The Fund may invest up to 65% of its net assets in non-rated securities and
securities rated below investment grade. For a discussion of risk factors
relating to such securities, see "Ratings Criteria," below.
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RATINGS CRITERIA
Appendix A 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 Fund.
The Fund may invest in investment grade debt securities which are
rated at the time of purchase within the four highest ratings groups assigned by
Moody's (Aaa, Aa, A and Baa), S&P (AAA, AA, A and BBB), Fitch (AAA, AA, A and
BBB) or Duff (AAA, AA, A and BBB), or, if unrated, which are determined by the
Adviser to be of comparable quality pursuant to guidelines approved by the
Trust's Board of Trustees. Debt securities rated in the lowest investment grade
debt category (Baa by Moody's or BBB by S&P, Fitch or Duff) have speculative
characteristics; changes in economic conditions or other circumstances are more
likely to lead to a weakened capacity to make principal and interest payments
than is the case with higher grade securities.
The Fund may also invest in debt securities rated below investment
grade. While any investment carries some risk, certain risks associated with
lower rated securities 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 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 Fund. Current laws, such as those requiring federally insured
savings and loan associations to remove investments in lower rated securities
from their funds, as well as other pending proposals, may also have a material
adverse effect on the market for lower rated securities.
The economy and interest rates may affect lower rated securities
differently than other securities. For example, the prices of lower rated
securities are more sensitive to adverse economic changes or individual
corporate developments than are the prices of higher rated investments. In
addition, during an economic downturn or period in which interest rates are
rising significantly, highly leveraged issuers may experience financial
difficulties, which, in turn, would adversely affect their ability to service
their principal and interest payment obligations, meet projected business goals
and obtain additional financing.
If an issuer of a security held by the 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.
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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 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 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 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 Adviser continuously monitors the issuers of lower rated
securities held by the 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.
In the event that, subsequent to its purchase by the Fund, a rated
security ceases to be rated or its rating is reduced below C, the Adviser
will consider whether the Fund should continue to hold the security.
ADDITIONAL INFORMATION ABOUT PORTFOLIO INSTRUMENTS
CORPORATE DEBT OBLIGATIONS
The Fund 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.
SHORT TERM OBLIGATIONS
The Fund may hold temporary cash balances which may be invested in
various short-term obligations (with maturities of 18 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 guaranteed investment contracts.
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During temporary defensive periods, the Fund may hold up to 100% of its total
assets in these types of obligations.
Investments include commercial paper and other short-term promissory
notes issued by corporations (including variable and floating rate instruments)
and 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
unrated, determined by the Adviser to be of comparable quality pursuant to
guidelines approved by the Trust's Board of Trustees. In addition, the Fund 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.
Bank obligations include bankers' acceptances and negotiable
certificates of deposit, and non-negotiable demand and time deposits issued for
a definite period of time and earning a specified return by a U.S. bank which is
a member of the Federal Reserve System. Bank obligations also include U.S.
dollar denominated bankers' acceptances and certificates of deposit and time
deposits issued by foreign branches of U.S. banks or foreign banks. Investment
in bank obligations is limited to the obligations of financial institutions
having more than $1 billion in total assets at the time of purchase. The 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.
GOVERNMENT SECURITIES
The Fund may invest in direct obligations of the U.S. Treasury and
U.S. government agencies and investment companies that invest in such
obligations. Examples of the types of U.S. government obligations that may be
held by the Fund include 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 Instruments."
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U.S. TREASURY OBLIGATIONS AND RECEIPTS
The Fund may invest in U.S. Treasury obligations consisting of bills,
notes and bonds issued by the U.S. Treasury, and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as STRIPS (Separately Traded Registered Interest
and Principal Securities).
The Fund may invest in separately traded interest and principal
component parts of the U.S. Treasury obligations that are issued by banks or
brokerage firms and are created by depositing U.S. Treasury obligations into a
special account at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
or 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.
FOREIGN SECURITIES AND CURRENCIES
The Fund may invest between 15% and 65% of its total assets at the
time of purchase in securities issued by foreign issuers either directly or
indirectly through American, European or Global Depository Receipt (see
"American, European and Global Depository Receipts" below).
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. 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.
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Since the Fund 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," occurred on January 1, 1999. As a result of the
conversion, securities issued by the member states are 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 continue to
function properly after the conversion date; the creation of suitable clearing
and settlement payment systems for the new currency; the legal treatment of
certain outstanding financial contracts after January 1, 1999 that refer to
existing currencies rather than the euro; the establishment and maintenance of
exchange rates for currencies being converted into the euro; the fluctuation of
the euro relative to non-euro currencies during the transition period from
January 1, 1999 to December 31, 2000 and beyond; whether the interest rate, tax
and labor regimes of participating European countries will converge over time;
and whether the conversion of the currencies of other EU countries such as the
United Kingdom, Denmark and Greece into the euro and the possible admission of
other non-EU countries such as Poland, Latvia and Lithuania as members of the EU
may have an impact on the euro.
These or other factors, including political and economic risks, could
cause market disruptions after the introduction of the euro, and could adversely
affect the value of securities and foreign currencies held by the Fund. 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 the 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
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deductions allowed to investors under U.S. federal income tax provisions, they
may reduce the return to the Fund's shareholders.
AMERICAN, EUROPEAN AND GLOBAL DEPOSITORY RECEIPTS
The Fund may invest in American Depository Receipts ("ADRs"), European
Depository Receipts ("EDRs"), and Global Depository Receipts ("GDRs"). 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. 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 the Fund's limitation with respect
to illiquid securities.
The principal difference between sponsored and unsponsored ADR, EDR
and GDR programs is that unsponsored ones are organized independently and
without the cooperation of the issuer of the underlying securities.
Consequently, available information concerning the issuer may not be as current
as for sponsored ADRs, EDRs and GDRs, and the prices of unsponsored ADRs, EDRs
and GDRs may be more volatile.
FOREIGN GOVERNMENT OBLIGATIONS
The Fund may purchase debt obligations issued or guaranteed by
governments (including states, provinces or municipalities) of developed
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 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
Fund is 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
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fluctuations in the values of portfolio securities but rather allows the Fund 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,
the Fund 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 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 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. The 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 Fund's 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 Fund. 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 Fund 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 Fund 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
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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.
GUARANTEED INVESTMENT CONTRACTS ("GICS")
The Fund may make limited investments in "GICs" issued by U.S.
insurance companies. When investing in "GICs," the Fund makes cash contributions
to a deposit fund or an insurance company's general account. The insurance
company then credits to the Fund monthly a guaranteed minimum interest which is
based on an index. GICs provide that this guaranteed interest will not be less
than a certain minimum rate. The insurance company may assess periodic charges
against a GIC for expense and service costs allocable to it, and the charges
will be deducted from the value of the deposit fund. The Fund will purchase a
GIC only when the Adviser has determined, under guidelines established by the
Board of Trustees, that the GIC presents minimal credit risks to the Fund and is
of comparable quality to instruments that are rated high quality by one or more
rating agencies. In addition, because the Fund may not receive the principal
amount of a GIC from the insurance company on seven days' notice or less, the
GIC is considered an illiquid investment, and, together with other instruments
in the Fund which are not readily marketable, will not exceed 15% of the Fund's
net assets.
REPURCHASE AGREEMENTS
Securities held by the Fund may be subject to repurchase agreements.
Under the terms of a repurchase agreement, the Fund purchases securities from
financial institutions, such as banks and broker-dealers, which the Fund's
Adviser deems creditworthy, subject to the seller's agreement to repurchase such
securities at a mutually agreed-upon date and price. The repurchase price
generally equals the price paid by the Fund plus interest negotiated on the
basis of current short term rates, which may be more or less than the rate on
the underlying portfolio securities.
The seller under a repurchase agreement will be required to maintain
the value of collateral held pursuant to the agreement at not less than the
repurchase price (including accrued interest). If the seller were to default on
its repurchase obligation or become insolvent, the Fund holding such obligation
would suffer a loss to the extent that the proceeds from a sale of the
underlying portfolio securities were less than the repurchase price under the
agreement, or to the extent that the disposition of such securities by the Fund
were delayed pending court action. Although there is no controlling legal
precedent confirming that the 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 the Fund's securities subject to
repurchase agreements and under federal laws,
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a court of competent jurisdiction would rule in favor of the Trust if presented
with the question. Securities subject to repurchase agreements will be held by
the Trust's custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by a Fund under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements in accordance
with its investment restrictions. Pursuant to such agreements, the 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. The Fund intends to enter into reverse repurchase agreements only to
avoid otherwise selling securities during unfavorable market conditions to meet
redemptions. At the time the 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. Reverse repurchase agreements
involve the risk that the market value of the securities sold by the 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.
DOLLAR ROLLS
The Fund 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 the Fund enters
into a Dollar Roll, it will place in a segregated custodial account assets such
as U.S. government securities or other liquid, high grade debt securities
consistent with the Fund's investment restrictions having a value equal to the
repurchase price (including accrued interest), and will subsequently monitor the
account to ensure that such equivalent value is maintained.
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LENDING OF PORTFOLIO SECURITIES
The Fund 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 the 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 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 the 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. The Fund will only enter
into loan arrangements with broker-dealers, banks or other institutions which
its Adviser has determined are creditworthy under guidelines established by the
Trust's Board of Trustees.
The 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, the 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.
VARIABLE AND FLOATING RATE INSTRUMENTS
The Fund may purchase variable and floating rate obligations
(including variable amount master demand notes) which are unsecured instruments
that permit the indebtedness thereunder to vary and provide for periodic
adjustments in the interest rate. Because variable and floating rate obligations
are direct lending arrangements between the Fund and the issuer, they are not
normally traded although certain variable and floating rate obligations, such as
Student Loan Marketing Association variable rate obligations, may have a more
active secondary market because they are issued or guaranteed by the U.S.
Government or its agencies or instrumentalities. Even though there may be no
active secondary market in such instruments, the 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, the
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.
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ILLIQUID SECURITIES
The Fund will not invest more than 15% its 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").
The 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, 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 the Fund during any
period that qualified institutional buyers become uninterested in purchasing
these restricted securities.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities entitling the holder to
receive interest paid or accrued on debt or the dividend paid on preferred stock
until the securities mature or are redeemed, converted or exchanged. Prior to
conversion, convertible securities have characteristics similar to ordinary debt
securities in that they normally provide a stable stream of income with
generally higher yields than those of common stock of the same or similar
issuers. Convertible securities rank senior to common stock in a corporation's
capital structure and therefore generally entail less risk than the
corporation's common stock. The value of the convertibility feature depends in
large measure upon the degree to which the convertible security sells above its
value as a fixed income security.
In selecting convertible securities, the Adviser 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 will consider whether such issuers will have
sufficient cash flow and profits to meet required principal and interest
payments. The Fund may retain a portfolio security whose rating has been changed
if the Adviser deems that retention of such security is warranted.
DERIVATIVE INSTRUMENTS
The Fund 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,
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options, forward currency contracts and structured debt obligations (including
collateralized mortgage obligations ("CMOs"), various floating rate instruments
and other types of securities).
Like all investments, derivative instruments involve several basic
types of risks which must be managed in order to meet investment objectives. The
specific risks presented by derivatives include, to varying degrees, market risk
in the form of underperformance of the underlying securities, exchange rates or
indices; credit risk that the dealer or other counterparty to the transaction
will fail to pay its obligations; volatility and leveraging risk that, if
interest or exchange rates change adversely, the value of the derivative
instrument will decline more than the securities, rates or indices on which it
is based; liquidity risk that the Fund will be unable to sell a derivative
instrument when it wants because of lack of market depth or market disruption;
pricing risk that the value of a derivative instrument (such as an option) will
not correlate exactly 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.
With respect to the portion of the Fund's investments invested in
derivatives, the Fund's Adviser has determined that the risk features that must
distinguish derivatives from other investment instruments (and which heavily
influence the market, volatility and leveraging, liquidity, and pricing risks
referred to above) can be described generally as "structural risk." Structural
risk refers to the contractual features of an investment that can cause its
total return to vary with changes in interest rates or other variables.
Structural risk is not unique to derivatives, but because derivatives often are
created through the intricate division of the cash flows of the underlying
security, they can (but do not necessarily) present a high degree of structural
risk. Structural risk can arise from variations in coupon levels, principal,
and/or average life.
The Adviser has adopted the following internal policies concerning
management of the structural risk inherent in derivative instruments in the
fixed income portion of the Fund's portfolio. The risk to the Fund due to the
use of such derivatives will be limited to the principal invested in such
instruments. When the Fund engages in short sales "against the box," risk of
loss will be limited to the value of the securities "in the box." The Adviser
does NOT presently intend to invest in the following types of derivatives which
are structured instruments, such as range notes, dual index notes, leveraged or
deleveraged bonds, inverse floaters, index amortizing notes and other structured
instruments having similar cash flow characteristics.
The Fund may invest in mortgage-backed derivative securities,
including CMOs, provided that they are not identified by the advisers as "high
risk securities" by certain quantitative tests that are generally accepted
standards in the investment industry.
Other derivative instruments that are suitable for investment include
asset-backed securities such as those backed by automobile loans or credit card
receivables. All such
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securities, however, must conform to the structural risk standards stated above
(i.e. not present high structural risk).
FUTURES AND RELATED OPTIONS
The Fund may invest in interest rate, bond index and foreign currency
futures contracts and options on these futures contracts in order to offset an
expected decrease in the value of its portfolio that might otherwise result from
a market decline. The Fund may invest in the instruments described either to
hedge the value of its 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. In addition, the Fund may utilize futures contracts in anticipation
of changes in the composition of its holdings for hedging purposes or to
maintain liquidity.
Futures contracts obligate the 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 the
Fund. When rates are falling or prices of securities are rising, these contracts
can secure higher yields for securities a Fund intends to purchase.
The Fund may purchase and sell call and put options on futures
contracts traded on an exchange or board of trade. When the 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 the 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, the 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 the 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 Fund intends to comply with the regulations of the Commodity
Futures Trading Commission (CFTC) exempting it from registration as a "commodity
pool operator." The Fund's commodities transactions must constitute bona fide
hedging or other permissible transactions pursuant to such regulations. In
addition, the Fund may not engage in such
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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 the 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.
RISK FACTORS ASSOCIATED WITH FUTURES AND RELATED OPTIONS
To the extent the Fund is engaging in a futures transaction as a
hedging device, due to the risk of an imperfect correlation between securities
in its portfolio 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 Fund 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 Fund 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
the Fund's net investment results if market movements are not as anticipated
when the hedge is established.
Successful use of futures by the Fund also is subject to the Adviser's
ability to predict correctly movements in the direction of securities prices,
interest rates and other economic factors. For example, if the Fund has hedged
against the possibility of a decline in the market adversely affecting the value
of securities held in its portfolio and prices increase instead, the Fund will
lose part or all of the benefit of the increased value of 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, 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.
Although the Fund intends to enter into futures contracts and 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. 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
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several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and potentially subjecting the Fund to
substantial losses. If it is not possible, or the Fund determines not, to close
a futures position in anticipation of adverse price movements, it will be
required to make daily cash payments of variation margin. In such circumstances,
an increase in the value of the portion of the Fund being hedged, if any, may
offset partially or completely losses on the futures contract.
The primary risks associated with the use of futures contracts and
options are:
1. the imperfect correlation between the change in market value of the
securities held by the 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 ability to predict correctly the direction of
securities prices, interest rates and other economic factors.
MORTGAGE-BACKED SECURITIES
The Fund 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
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rating at the time of purchase by S&P or by Moody's or, if unrated, will be in
the Adviser's opinion equivalent in credit quality to such rating.
Mortgage-backed securities issued by private issuers, whether or not such
obligations are subject to guarantees by the private issuer, may entail greater
risk than obligations directly or indirectly guaranteed by the U.S. government.
The yield and average life characteristics of mortgage-backed
securities differ from traditional debt securities. A major difference is that
the principal amount of the obligations may be prepaid at any time because the
underlying assets (i.e., loans) generally may be prepaid at any time. As a
result, if a mortgage-backed security is purchased at a premium, a prepayment
rate that is faster than expected will reduce the expected yield to maturity and
average life, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity and average life. Conversely, if
a mortgage-backed security is purchased at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will decrease,
the expected yield to maturity and average life. There can be no assurance that
the Trust's estimation of the duration of mortgage-backed securities it holds
will be accurate or that the duration of such instruments will always remain
within the maximum target duration. In calculating the average weighted maturity
of the Fund, 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.
ASSET-BACKED SECURITIES
The Fund 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
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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.
The Fund may invest in securities the timely payment of principal and
interest on which are guaranteed by the GNMA a wholly-owned U.S. Government
corporation within the Department of Housing and Urban Development. The market
value and interest yield of these instruments can vary due to market interest
rate fluctuations and early prepayments of underlying mortgages. These
securities represent ownership in a pool of federally insured mortgage loans.
GNMA certificates consist of underlying mortgages with a maximum maturity of 30
years. However, due to scheduled and unscheduled principal payments, GNMA
certificates have a shorter average maturity and, therefore, less principal
volatility than a comparable 30-year bond. Since prepayment rates vary widely,
it is not possible to predict accurately the average maturity of a particular
GNMA pool. GNMA securities differ from conventional bonds in that principal is
paid back to the certificate holders over the life of the loan rather than at
maturity. The scheduled monthly interest and principal payments relating to
mortgages in the pool are "passed through" to investors. In addition, there may
be unscheduled principal payments representing prepayments on the underlying
mortgages. Although GNMA certificates may offer yields higher than those
available from other types of U.S. Government securities, GNMA certificates may
be less effective than other types of securities as a means of "locking in"
attractive long-term rates because of the prepayment feature. For instance, when
interest rates decline, the value of a GNMA certificate likely will not rise as
much as comparable debt securities due to the prepayment feature. In addition,
these prepayments can cause the price of a GNMA certificate originally purchased
at a premium to decline in price to its par value, which may result in a loss.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities guaranteed
by the GNMA include GNMA Mortgage Pass-Through Certificates (also known as
Ginnie Maes) which are guaranteed as to the timely payment of principal and
interest by GNMA and such guarantee is backed by the full faith 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
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include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs"
or "Pcs"). FHLMC is a corporate instrumentality of the United States, created
pursuant to an Act of Congress, which is owned entirely by Federal Home Loan
Banks. Freddie Macs are not guaranteed by the United States or by any Federal
Home Loan Banks and do not constitute a debt or obligation of the United States
or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely
payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either
ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. When FHLMC does not guarantee timely payment of
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
Non-mortgage asset-backed securities involve certain risks that are
not presented by mortgage-backed securities. Primarily, these securities may not
have the benefit of the same security interest in the underlying collateral.
Credit card receivables are generally unsecured and the debtors are entitled to
the protection of a number of state and federal consumer credit laws, many of
which have given debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the balance due. Most issuers of automobile receivables
permit the servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have an
effective security interest in all of the obligations backing such receivables.
Therefore, there is a possibility that recoveries on repossessed collateral may
not, in some cases, be able to support payments on these securities.
INTEREST RATE SWAPS
The Fund may enter into interest rate swaps for hedging purposes and
not for speculation. The Fund will typically use interest rate 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 of a predefined "index," such as an exchange of fixed rate payments for
floating rate payments.
The net amount of the excess, if any, of the 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. The 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 either "A" or "A-1" or better by S&P,
Duff or Fitch, or "A" or "P-1" or better by Moody's or the claims paying ability
of the other party is deemed creditworthy and any such obligation the Fund may
have under such an arrangement will be covered by setting aside liquid high
grade securities in a segregated account.
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The 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 Fund and its Adviser
believes that such obligations do not constitute senior securities as defined in
the 1940 Act and, accordingly, will not treat them as being subject to the
Fund's borrowing restrictions. The net amount of the excess, if any, of the
Fund's obligations over their entitlements with respect to each swap will be
accrued on a daily basis and an amount of liquid assets, such as cash, U.S.
government securities or other liquid high grade debt securities, having an
aggregate net asset value at least equal to such accrued excess will be
maintained in a segregated account by the Fund's custodian.
If there is a default by the other party to a swap transaction, the
Fund 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 Fund 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 Fund 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.
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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
the 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.
WHEN-ISSUED SECURITIES
The Fund may purchase securities Fund on a "when-issued" basis (i.e.,
for delivery beyond the normal settlement date at a stated price and yield). The
Fund does 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, the 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 Fund 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 the Fund agrees to purchase when-issued securities, the custodian
sets aside cash or liquid portfolio securities equal to the amount of the
commitment in a separate account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case the
Fund may be required subsequently to place additional assets in the separate
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitment, marked to market daily. It is likely that the
Fund's net assets will fluctuate to a greater degree when it sets aside
portfolio securities to cover such purchase commitments than when it sets aside
cash. Because the Fund will set aside cash or liquid assets to satisfy its
purchase commitments in the manner described, the Fund's liquidity and ability
to manage its portfolio might be affected in the event its commitments to
purchase when-issued securities ever exceeded 25% of the value of its total
assets.
When the 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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SECURITIES OF OTHER INVESTMENT COMPANIES
Subject to 1940 Act limitations and pursuant to applicable SEC
requirements, the Fund may invest in securities issued by other investment
companies which invest in high quality, short-term debt securities and which
determine their net asset value per share based on the amortized cost or
penny-rounding method. 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 the Fund and, therefore, will be borne indirectly by
its shareholders.
The Fund may invest in securities issued by other investment
companies. The Fund currently intends to limit its investments in securities
issued by other investment companies so that, as determined immediately after a
purchase of such securities is made: (i) not more than 5% of the value of the
Fund's total assets will be invested in the securities of any one investment
company; (ii) not more than 10% of the value of its total assets will be
invested in the aggregate in securities of investment companies as a group; and
(iii) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund or by the Trust as a whole.
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.
OTHER DEBT SECURITIES
The Fund may also invest in other debt securities which may include:
equipment lease and trust certificates; state, municipal and private activity
bonds; and securities of supranational organizations such as the World Bank.
Some of the securities in which the Fund invests may have warrants or options
attached.
The Fund's appreciation may result from an improvement in the credit
standing of an issuer whose securities are held or a general decline in the
level of interest rates or a combination of both. An increase in the level of
interest rates generally reduces the value of the fixed rate debt instruments
held by the Fund; conversely, a decline in the level of interest rates generally
increases the value of such investments. An increase in the level of interest
rates may temporarily reduce the value of the floating rate debt instruments
held by the Fund; conversely, a decline in the level of interest rates may
temporarily increase the value of those investments.
PORTFOLIO TURNOVER
The Fund 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
-22-
<PAGE>
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.
The portfolio turnover rate for the 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. Under normal market conditions, the
Fund's portfolio turnover is expected to be around 100%, but could be higher.
INVESTMENT LIMITATIONS
The 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 the Fund without the affirmative vote of the holders
of a majority of the Fund's outstanding shares.
As used in this Statement of Additional Information, a "vote of the
holders of a majority of the outstanding shares" of the Trust or the 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 Fund or (b)
67% or more of the shares of the Trust or Fund present at a meeting if more than
50% of the outstanding shares of the Trust or Fund are represented at the
meeting in person or by proxy.
The Fund may not:
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;
-23-
<PAGE>
(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.
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 the
Fund's portfolio securities will not constitute a violation of such limitation
for purposes of the 1940 Act.
In addition, the Fund is subject to the following non-fundamental
limitations, which may be changed without the vote of shareholders:
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<PAGE>
The Fund may not:
1. Acquire any other investment company or investment company security
except in connection with a merger, consolidation, reorganization or acquisition
of assets or where otherwise permitted under the 1940 Act.
2. Write or sell put options, call options, straddles, spreads, or any
combination thereof, except as consistent with the Fund's investment objective
and policies for transactions in options on securities or indices of securities,
futures contracts and options on futures contracts and in similar investments.
3. Purchase securities on margin, make short sales of securities or
maintain a short position, except that, as consistent with the 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% 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 the Fund's
investment practices described in its Prospectus or Statement of Additional
Information are not deemed to be pledged for purposes of this limitation.
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 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
-25-
<PAGE>
weekend and holiday closings; (c) the SEC has by order permitted such
suspension; or (d) an emergency exists as determined by the SEC.
As described in the Prospectus, Class I Shares of the Fund are sold to
certain qualified investors at their net asset value without a sales charge.
Class A Shares of the Fund are sold to public investors at the public offering
price based on the Fund's net asset value plus a front-end load or sales charge
as described in the Prospectus. Class B Shares of the Fund are sold to public
investors at net asset value but are subject to a contingent deferred sales
charge which is payable upon redemption of such shares as described in the
Prospectus. 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. There is no sales load or contingent
deferred sales charge imposed for shares acquired through the reinvestment of
dividends or distributions on such shares.
As of the date of this Statement of Additional Information, the Fund
had not commenced operations.
Automatic investment programs, such as the Planned Investment Program
("Program") described in the Prospectus, offered by the Fund permit an investor
to use "dollar cost averaging" in making investments. Under this Program, an
agreed upon fixed dollar amount is invested in Fund shares at predetermined
intervals. This may help investors to reduce their average cost per share
because the Program results in more shares being purchased during periods of
lower share prices and fewer shares during periods of higher share prices. In
order to be effective, dollar cost averaging should usually be followed on a
sustained, consistent basis. Investors should be aware, however, that dollar
cost averaging results in purchases of shares regardless of their price on the
day of investment or market trends and does not ensure a profit, protect against
losses in a declining market, or prevent a loss if an investor ultimately
redeems his or her shares at a price which is lower than their purchase price.
An investor may want to consider his or her financial ability to continue
purchases through periods of low price levels. From time to time, in
advertisements, sales literature, communications to shareholders and other
materials ("Materials"), the Trust may illustrate the effects of dollar cost
averaging through use of or comparison to an index such as the S&P 500 Index or
Lehman Intermediate Government Index.
OFFERING PRICE PER CLASS A SHARE OF THE FUND
An illustration of the computation of the offering price per Class A
share of the Fund, based on the estimated value of its net assets and number of
outstanding shares on its commencement date, is as follows:
STRATEGIC INCOME BOND FUND
<TABLE>
<S> <C>
Net Assets of A Shares...................................... $10.00
Outstanding A Shares........................................ 1
-26-
<PAGE>
Net Asset Value Per Share................................... $10.00
Sales Charge, 4.75% of
offering price (5.00% of
net asset value per share).................................. $ .50
Offering to Public.......................................... $10.50
</TABLE>
EXCHANGE PRIVILEGE
Investors may exchange all or part of their Class A Shares, Class B
Shares or Class C Shares as described in the Prospectus. Any rights an Investor
may have (or have waived) to reduce the sales load applicable to an exchange, as
may be provided in the Fund's 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
the Statements of Additional Information and the related Prospectuses:
<TABLE>
<S> <C>
Money Market Fund
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
-27-
<PAGE>
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
Equity Growth Fund
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
-28-
<PAGE>
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
Bond Fund
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 Municipal 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
International Equity Fund
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
-29-
<PAGE>
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
Mid Cap Growth Fund
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
Strategic Income Bond Fund
Class JJ Class I Shares
Class JJ - Special Series 2 Class A Shares
Class JJ - Special Series 2 Class B Shares
Class JJ - 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,
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<PAGE>
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.
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.
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<PAGE>
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.
The Fund will be treated as a separate corporate entity under the Code
and intends to qualify as a regulated investment company. In order to qualify
for tax treatment as a regulated investment company under the Code, the Fund
must satisfy, in addition to the distribution requirement described in the
Prospectus, certain requirements with respect to the source of its income during
a taxable year. At least 90% of the gross income of the Fund must be derived
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stocks, securities or foreign currencies, and
other income (including but not limited to gains from options, futures, or
forward contracts) derived with respect to the Fund's business of investing in
such stock, securities or currencies. The Treasury Department may by regulation
exclude from qualifying income foreign currency gains which are not directly
related to the Fund's principal business of investing in stock or securities, or
options and futures with respect to stock or securities. Any income derived by
the Fund from a partnership or trust is treated as derived with respect to the
Fund's business of investing in stock, securities or currencies only to the
extent that such income is attributable to items of income which would have been
qualifying income if realized by the Fund in the same manner as by the
partnership or trust.
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to currently distribute an amount equal to specified
percentages of their ordinary taxable income and capital gain net income (excess
of capital gains over capital losses). The 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 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.
The 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."
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<PAGE>
The tax principles applicable to transactions in financial instruments
and futures contacts and options that may be engaged in by the Fund, and
investments in passive foreign investment companies ("PFICs"), are complex and,
in some cases, uncertain. Such transactions and investments may cause the 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 the 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.
TRUSTEES AND OFFICERS
The trustees and executive officers of the Trust, their addresses,
principal occupations during the past five years, and other affiliations are as
follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
---------------- ------------ ----------------------
<S> <C> <C>
Robert D. Neary Chairman of the Board and Trustee Retired Co-Chairman of Ernst & Young,
32980 Creekside Drive April 1984 to September 1993; Director,
Pepper Pike, OH 44124 Cold Metal Products, Inc., since March
Age 66 1994; Director, Strategic Distribution,
Inc., since January 1999. Trustee, The
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, The
Armada Advantage Fund, since 1998.
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<PAGE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
---------------- ------------ ----------------------
<S> <C> <C>
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, Adam
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, The Armada Advantage Fund,
since 1998.
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, The
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 October
Age 63 1997; Director, National City Bank until
October 1997; Director, Republic
Engineered Steels, October 1997 to
September 1998. Trustee, The Aramada
Advantage Fund, since 1998.
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<PAGE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
---------------- ------------ ----------------------
<S> <C> <C>
Richard W. Furst, Dean 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, The Armada
Advantage Fund, since 1998.
Gerald L. Gherlein Trustee Executive Vice-President and General
3679 Greenwood Drive Counsel, Eaton Corporation, since 1991
Pepper Pike, OH 44124 (global manufacturing); Trustee, WVIZ
Age 61 Educational Television (public
television). Trustee, The Armada
Advantage Fund, since 1998.
J. William Pullen Trustee President and Chief Executive Officer,
Whayne Supply Company Whayne Supply Co. (engine and heavy
1400 Cecil Avenue equipment distribution), since 1986;
P.O. Box 35900 President and Chief Executive Officer,
Louisville, KY 40232-5900 American Contractors Rentals & Sales
Age 60 (rental subsidiary of Whayne Supply Co.),
since 1988. Trustee, The 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 56
John Leven Treasurer Director of Funds Accounting of SEI
One Freedom Valley Drive Investments since March 1999; Division
Oaks, PA 19456 Controller, First Data Corp. from
Age 42 February 1998 to March 1999; Corporate
Controller, FPS Services, a mutual funds
servicing company, from February 1993 to
February 1998; Treasurer, FPS Broker
Services, Inc. from March 1993 to
December 1998.
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<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
---------------- ------------ ----------------------
<S> <C> <C>
Timothy D. Barto Assistant Treasurer Vice President and Assistant Secretary,
One Freedom Valley Drive SEI Investments Mutual Funds Services
Oaks, PA 19456 and SEI Investments Distribution Co.
Age 32 since November 1999; Associate, Dechert
Price & Rhoads (law firm), 1997 to 1999;
Associate, Richter, Miller & Firm (law
firm); 1994 to 1997.
</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 IMC.
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 IMC, the Fund's investment adviser.
Mr. Leven and Mr. Barto are employed by SEI Investments Mutual Funds
Services, which receives fees as Administrator to the Trust. Mr. Barto is also
employed by SEI Investments Distribution Co., which receives fees as Distributor
to the Trust. Mr. McConnel is a partner of the law firm, Drinker Biddle & Reath
LLP, which receives fees as counsel to the Trust.
With respect to the Trust and The Armada Advantage Fund, 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 two fund
companies generally hold concurrent Board meetings. The Chairman of the Board is
entitled to receive an additional $5,000 per annum for services in such
capacity. The trustees and officers of the Trust own less than 1% of the shares
of the Trust.
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The following table summarizes the compensation for each of
the Trustees of the Trust for the fiscal year ended May 31, 2000:
<TABLE>
<CAPTION>
Pension or Estimated
Aggregate Retirement Benefits Approval Total Compensation
Name of Compensation Accrued as Part of Benefits Upon From the Trust and
Person, Position from the Trust the Trust's Expense Retirement Fund Complex*
---------------- -------------- ------------------- ---------- -------------
<S> <C> <C> <C> <C>
Robert D. Neary, $0 $0
Chairman and Trustee
Leigh Carter, Trustee $0 $0
John F. Durkott, Trustee $0 $0
Robert J. Farling, Trustee $0 $0
Richard W. Furst, Trustee $0 $0
Gerald L. Gherlein, Trustee $0 $0
Herbert R. Martens, Jr., $0 $0 $0 $0
President and Trustee
J. William Pullen, Trustee $0 $0
</TABLE>
--------------------
* The "Fund Complex" currently consists of Armada Funds and The Armada
Advantage Fund and, until June 16, 2000, also included The Parkstone Group
of Funds. Each of the Trustees has served as Trustee to all three
investment companies. As of June 16, 2000, reorganizations of the
portfolios of The Parkstone Group of Funds into portfolios of the Trust
were completed.
The Trustees may elect to defer payment of 25% to 100% of the fees
they receive in accordance with a Trustee Deferred Compensation Plan (the
"Plan"). Under the Plan, a Trustee may elect to have his or her deferred fees
treated as if they had been invested by the Trust in the shares of one or more
portfolios of the Trust and the amount paid to the Trustee under the Plan will
be determined based on the performance of such investments. Distributions are
generally of equal installments over a period of 2 to 15 years. The Plan will
remain unfunded for federal income tax purposes under the Internal Revenue Code
of 1986, as amended (the "Code"). Deferral of Trustee fees in accordance with
the Plan will have a negligible impact on portfolio assets and liabilities and
will not obligate the Trust to retain any trustee or pay any particular level of
compensation.
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<PAGE>
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 Fund under an advisory
agreement dated _______, 2000 (the "Advisory Agreement").
The Advisory Agreement provides that the Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the performance of the Advisory Agreement, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Adviser in the performance of its
duties or from reckless disregard by it of its duties and obligations
thereunder.
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<PAGE>
The Advisory Agreement relating to the Fund was approved by the sole
shareholder of the Fund as of the day prior to the day it commenced operations.
Unless sooner terminated, the Advisory Agreement will continue in effect with
respect to the Fund until 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 the Fund (as defined in the Fund's 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 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.
ADMINISTRATION AGREEMENT AND SUB-ADMINISTRATION AGREEMENT
The Trust and SEI Investments Mutual Funds Services (the
"Administrator") entered into an administration agreement (the "Administration
Agreement") effective May 1, 1998 for an initial term of two years. The
Administration Agreement has been extended on a month-to-month basis after April
30, 2000, by an amendment dated as of February 22, 2000 and by resolution of the
Board of Trustees.
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 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.
National City Bank ("NCB") serves as sub-administrator for each of the
funds of the Trust and provides certain services as may be requested by the
Administrator from time to time. For its services as Sub-Administrator, NCB
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
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<PAGE>
Armada up to the first $15 billion, and .015% of the aggregate average daily net
assets over $15 billion.
DISTRIBUTION PLANS AND RELATED AGREEMENT
The Distributor acts as distributor of the Fund's shares pursuant to a
distribution agreement with the Trust dated as of May 1, 1998. 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 provides that each C share class will compensate the
Distributor for distribution of Class C Shares in an amount not to exceed .75%
of the average net assets of such class. Distribution expenses
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<PAGE>
reimbursable by the Distributor pursuant to each Distribution Plan include
direct and indirect costs and expenses incurred in connection with advertising
and marketing a fund's shares, and direct and indirect costs and expenses of
preparing, printing and distribution of its prospectuses to other than current
shareholders.
The Distribution Plans have been approved by the Board of Trustees,
and will continue in effect for successive one year periods provided that such
continuance is specifically approved by (1) the vote of a majority of the
trustees who are not parties to either Plan or interested persons of any such
party and who have no direct or indirect financial interest in either Plan and
(2) the vote of a majority of the entire Board of Trustees.
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 Fund. Under its Custodian Services
Agreement, National City Bank has agreed to:
(i) maintain a separate account or accounts in the name of the Fund;
(ii) hold and disburse portfolio securities on account of the Fund;
(iii) collect and make disbursements of money on behalf of the Fund;
(iv) collect and receive all income and other payments and
distributions on account of the Fund's portfolio securities;
(v) respond to correspondence by security brokers and others relating
to its duties;
(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 Fund, provided that it
shall remain responsible for the performance of all of its duties under the
Custodian Services Agreement and shall hold the Fund harmless from the acts and
omissions of any bank or trust company serving as sub-custodian. The 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;
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<PAGE>
(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 the
Fund.
SHAREHOLDER SERVICES PLANS
The Trust has implemented the Shareholder Services Plan for the Fund's
Class A Shares, the B Shares Plan for the Fund's Class B Shares and the C Shares
Plan for the 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 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 0.25% (on an annualized basis) 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.
Pursuant to the Shareholder Services Plan for Class A Shares, the B
Shares Plan and the C Shares Plan, 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 Fund;
(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;
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<PAGE>
(vii) forwarding shareholder communications; and
(viii) other similar services requested by the Trust.
Agreements between the Trust and financial institutions will be
terminable at any time by the Trust without penalty.
PORTFOLIO TRANSACTIONS
Pursuant to its Advisory Agreement with the Trust, IMC is responsible
for making decisions with respect to and placing orders for all purchases and
sales of portfolio securities for the Fund. The Adviser 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. There is generally no stated
commission in the case of securities traded in the over-the-counter market, but
the price includes an undisclosed commission or mark-up.
While the Adviser generally seeks competitive spreads or commissions,
it may not necessarily allocate each transaction to the underwriter or dealer
charging the lowest spread or commission available on the transaction.
Allocation of transactions, including their frequency, to various dealers is
determined by the Adviser in its best judgment and in a manner deemed fair and
reasonable to shareholders. Under the 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 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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Investment decisions for the Fund are made independently from those
for the other Funds and for other investment companies and accounts advised or
managed by the Adviser. Such other Funds, investment companies and accounts may
also invest in the same securities as the Fund. When a purchase or sale of the
same security is made at substantially the same time on behalf of the Fund and
another investment company or account, the transaction will be averaged as to
price, and available investments allocated as to amount, in a manner which the
Adviser believes to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
sold by the Fund. In connection therewith, and to the extent permitted by law,
and by the Advisory Agreement, the Adviser may aggregate the securities to be
sold or purchased for the Fund with those to be sold or purchased for other
investment companies or advisory clients.
AUDITORS
Ernst & Young LLP, independent auditors, with offices at Two Commerce
Square, 2001 Market Street, Suite 4000, Philadelphia, Pennsylvania 19103, serve
as independent auditors of the Trust.
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.
YIELD AND PERFORMANCE INFORMATION
The Fund's "yield" described in the Prospectus is calculated by
dividing the Fund's net investment income per share earned during a 30-day
period (or another period permitted by the rules of the SEC) by the net asset
value per share on the last day of the period and annualizing the result on a
semi-annual basis by adding one to the quotient, raising the sum to the power of
six, subtracting one from the result and then doubling the difference. The
Fund's net investment income per share earned during the period is based on the
average daily number of shares outstanding during the period entitled to receive
dividends and includes dividends and interest earned during the period minus
expenses accrued for the period, net of reimbursements. This calculation can be
expressed as follows:
Yield = 2 [((a-b) TO THE POWER OF 6/(cd + 1)) - 1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
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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 Fund calculates interest earned on debt obligations held in its
portfolio 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.
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 "Purchasing, Selling and
Exchanging Fund Shares - Sales Charges" in the Prospectus.
The current yield for each class of shares in the Fund may be obtained
by calling the Trust at the telephone number provided on the cover page. Quoted
yields are not indicative of future yields. Yields will depend upon factors such
as fund maturity, the Fund's expenses and the types of instruments held by the
Fund.
Because the Strategic Income Bond Fund had not commenced operations as
of the date of this Statement of Additional Information, no performance
information is available for Shares of the Fund.
The 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:
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T = [(ERV TO THE POWER OF 1/n/P) - 1]
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
The 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:
T = (ERV/P) - 1
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions
on the reinvestment dates during the period and include all recurring fees
charged to all shareholder accounts, assuming an account size equal to the
Fund's mean (or median) account size for any fees that vary with the size of the
account. The maximum sales load and other charges deducted from payments are
deducted from the initial $1,000 payment (variable "P" in the formula). The
ending redeemable value (variable "ERV" in the formula) is determined by
assuming complete redemption of the hypothetical investment and the deduction of
all contingent deferred sales charges and other nonrecurring charges at the end
of the measuring period covered by the computation.
The Fund may also from time to time include discussions or
illustrations of the effects of compounding in Materials. "Compounding" refers
to the fact that, if dividends or other distributions on the Fund's investments
are reinvested by being paid in additional Fund shares, any future income or
capital appreciation of the Fund would increase the value, not only of the
original Fund investment, but also of the additional Fund shares received
through reinvestment. As a result, the value of the Fund's investments would
increase more quickly than if dividends or other distributions had been paid in
cash.
In addition, the Fund may also include in Materials discussions and/or
illustrations of the potential investment goals of a prospective investor,
investment management strategies, techniques, policies or investment suitability
of the Fund, high-quality investments, economic conditions, the relationship
between sectors of the economy and the economy as a whole, various securities
markets, the effects of inflation and historical performance of various asset
classes,
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<PAGE>
including but not limited to, stocks, bonds and Treasury securities. From time
to time, Materials may summarize the substance of information contained in
shareholder reports (including the investment composition of the Fund), as well
as the views of the Adviser as to current market, economic, trade and interest
rate trends, legislative, regulatory and monetary developments, investment
strategies and related matters believed to be of relevance to the Fund. The Fund
may also include in Materials charts, graphs or drawings which compare the
investment objective, return potential, relative stability and/or growth
possibilities of the Fund and/or other mutual funds, or illustrate the potential
risks and rewards of investment in various investment vehicles, including but
not limited to, stocks, bonds, Treasury securities and shares of the Fund and/or
other mutual funds. Materials may include a discussion of certain attributes or
benefits to be derived by an investment in a Fund and/or other mutual funds
(such as value investing, market timing, dollar cost averaging, asset
allocation, constant ratio transfer, automatic accounting rebalancing, the
advantages and disadvantages of investing in tax-deferred and taxable
investments), shareholder profiles and hypothetical investor scenarios, timely
information on financial management, tax and retirement planning and investment
alternatives to certificates of deposit and other financial instruments. Such
Materials may include symbols, headlines or other material which highlight or
summarize the information discussed in more detail therein.
CODES OF ETHICS
The Trust, IMC and the Distributor have adopted codes of ethics
pursuant to Rule 17j-1 under the 1940 Act that permit investment personnel
subject to their particular codes of ethics to invest in securities, including
securities that may be purchased or held by the Fund, for their own accounts.
The codes of ethics are on public file with, and available from, the Securities
Exchange Commission's Public Reference Room in Washington, D.C.
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.
As used in the Prospectus, "assets belonging to the Fund" means the
consideration received by the Trust upon the issuance of shares in the 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 the Fund are charged
with the liabilities in respect of that Fund.
As of June 21, 2000, the following persons owned of record 5% or more
of the shares of the other funds offered by the Trust:
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<TABLE>
<CAPTION>
NAME AND ADDRESS OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
OWNED
<S> <C> <C>
INTERNATIONAL EQUITY FUND
(CLASS C SHARES)
First Clearing Corporation 1,141.8370 8.69%
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 21.12%
A/C 2125-0724
Keven Crawford IRA
FCC as Custodian
1111 E. St. Rd 14
Winamac, IN 46996
First Clearing Corporation 692.6090 5.27%
A/C 1147-1851
Michael C. Anderson
4301 East Market
P.O. Box 179
Logansport, IN 46947-0179
First Clearing Corporation 848.9520 6.46%
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 10.36%
A/C 8645-8446
Ronald W. Watt
127 Public Sq #5200
Cleveland, OH 44114-1216
First Clearing Corporation 1,259.5110 9.59%
A/C 4824-4290
John P. Klingbeil &
Georgann Klingbeil
26924 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
-48-
<PAGE>
First Clearing Corporation 1,261.1050 9.60%
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 8.12%
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 SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon & Co. (Reinv) 13,568,960.3860 28.28%
Attn: Trust Mutual Funds
Account #100023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 17,761,254.1790 37.01%
C/o National City Bank
Trust Mutual FPS
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 14,415,300.1600 30.04%
C/o Sheldon & Co.
Trust Mutual FPS
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
LARGE CAP ULTRA FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
Bisys BD Services, Inc. 59,915.0390 5.61%
P.O. Box 4054
Concord, CA 94524-4054
Soy Capital AG Services & Trust Co 87,288.1650 8.18%
455 N. Main Street
Decatur, IL 62523-1103
SEI Investments Co. 4.9460 100.00%
Attn: Rob Silvestri
1 Freedom Valley Rd.
Oaks, PA 19456
-49-
<PAGE>
<CAPTION>
LARGE CAP ULTRA FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Shelton & Co. (REINN) 6,979,612.1890 51.27%
ATTN: Trust Mutual Funds
Account #10023342
P.O. Box 94777
Cleveland, OH 44101-4777
Shelton & Co. TTEE 5,954,036.0250 43.74%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
SEI Investments Co. 6.6180 100.00%
Attn: Rob Silvestri
1 Freedom Valley Rd.
Oaks, PA 19456
<CAPTION>
MID CAP GROWTH FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon & Co. (Reinv) 12,147,038.1440 69.91%
Attn. Trust Mutual Funds
Account #10023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 4,551,191.0570 26.19%
c/o National City Bank
Trust Mutual FDS
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
TAX MANAGED EQUITY OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
First Clearing Corporation 67,470.7440 5.51%
A/C 2403-5876
Cathleen A. Conry
PO Box 567
Aurora, OH 44202-0567
NFSC FEBO #Z41-257923 79,923.4880 6.53%
Allison P. Vanhartesveldt
3141 N. Quincy St.
Arlington, VA 22207-4144
-50-
<PAGE>
<CAPTION>
TAX MANAGED EQUITY FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS C SHARES) OWNED
<S> <C> <C>
First Clearing Corporation 3,925.7670 11.33%
A/C 2809-5755
Florence Dixon
P.O. Box 119
Cooksburg, PA 16217-0119
First Clearing Corporation 5,763.6890 16.64%
A/C 8650-9893
Maryla F. White
1313 Lance Drive
Louisville, KY 40216-3930
First Clearing Corporation 1,770.5380 5.11%
A/C 3762-1128
Richard L. Gump &
Marla K. Gump
4718 Dennison Avenue
Cleveland, OH 44102-6019
First Clearing Corporation 2,932.5510 8.47%
A/C 3281-7977
Edward Folkman
Carol Folkman
7897 Oakhurst Drive
Brecksville, OH 44141-1123
First Clearing Corporation 3,199.8580 9.24%
A/C 3204-6205
Anna I. Fierle
Margaret M. Meder
6513 Dennison Blvd.
Parma Heights, OH 44130-4104
First Clearing Corporation 7,331.3780 21.17%
A/C 6108-1699
Kenneth A. Otto &
Merilee W. Otto
1710 Rood Point Road
Muskegon, MI 49441-4849
First Clearing Corporation 2,795.2480 8.07%
A/C 6960-1719
Pietro Ragone Trust
Domenico Ragone TTEE
3321 Friar Drive
Parma, OH 44134-5518
-51-
<PAGE>
<CAPTION>
TAX MANAGED EQUITY FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon & Co TTEE 9,259,215.0000 51.36%
C/O National City Bank
Trust Mutual Fds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 8,358,046.3240 46.36%
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 SHARES
(CLASS B SHARES) OWNED
<S> <C> <C>
First Clearing Corporation 6,793.4780 5.12%
A/C 8406-2776
Trionix Research Lab Inc.
8037 Bavaria Road
Twinsberg, OH 44087-2261
First Clearing Corporation 7,206.6930 5.43%
Eugene Arrigoni IRA
FCC as Custodian
4101 Grady Smith Road
Loganville, GA 30052-3650
<CAPTION>
CORE EQUITY FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS C SHARES) OWNED
<S> <C> <C>
Bill Bartley 141.8360 75.26%
476 Baldwin Heights Cir
Howard, OH 43028-9505
SEI Trust Company CUST 39.7880 21.11%
Roth Contribution IRA
Kathleen O'Connor
1365 Clarence Avenue #101
Lakewood, OH 44107-2862
<CAPTION>
CORE EQUITY FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon & Co. TTEE 560,731.2250 6.36%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
-52-
<PAGE>
C/O National City Bank 8,019,347.7550 90.96%
Shelden & Co.
Trust Mutual Funds
PO Box 94777
Cleveland, OH 44101-4777
<CAPTION>
SMALL CAP VALUE FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS B SHARES) OWNED
<S> <C> <C>
First Clearing Corporation 2,918.6850 5.71%
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 SHARES
(CLASS C 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
First Clearing Corporation 762.5910 16.40%
A/C 4089-7905
Hart Road Pathology SC MP
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
-53-
<PAGE>
<CAPTION>
SMALL CAP VALUE FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon & Co. (Reinv) 12,335,750.3920 52.99%
Attn: Trust Mutual Funds
Account #10023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 7,306,728.9450 31.38%
P.O. Box 94984
ATTN: Trust Mutual Funds
Cleveland, OH 44101-4984
Sheldon & Co. (Cash/Reinv) 2,397,547.1420 10.30%
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 SHARES
(CLASS C SHARES) OWNED
<S> <C> <C>
First Clearing Corporation 1,209.3140 21.08%
A/C 7081-0852
Ridgeway Community Nurses Srvcs
ATTN: Lori MacDonald
20 North Broad Street
Ridgway, PA 15853-1002
First Clearing Corporation 643.8910 11.22%
A/C 7194-4927
Wayne A. Ruhlman IRA R/O
FCC as Custodian
4376 Porter Road
North Olmsted, OH 44070-2520
First Clearing Corporation 1,311.1030 22.85%
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
-54-
<PAGE>
First Clearing Corporation 1,270.6570 22.15%
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 SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon & Co. (REINV) 10,289,093.9410 43.38%
Attn: Trust Mutual Funds
Account #10023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 7,868,636.8490 33.17%
c/o National City Bank
Trust Mutual FDS
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 4,590,466.2140 19.35%
c/o Sheldon & Co
Trust Mutual FDS
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
EQUITY INCOME FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS C 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
-55-
<PAGE>
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 SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon & Co. (Reinv) 10,940,321.5070 25.74%
Attn: Trust Mutual Funds
Account #10023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 8,987,586.0190 21.14%
P.O. Box 94984
Attn: Trust Mutual Funds
Cleveland, OH 44101-4984
Sheldon & Co. (Cash/Reinv) 20,709,637.4000 48.72%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
EQUITY INDEX FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
First Clearing Corporation 44,011.4930 6.34%
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 SHARES
(CLASS B SHARES) OWNED
<S> <C> <C>
S & H Machine Product Inc. PSP 4,666.4530 9.89%
Stanimir M. Vitkovic
6180 West Smith Road
Medina, OH 44256-8949
First Clearing Corporation 2,686.8680 5.69%
A/C 3878-8265
Donald K. Hansen SEP IRA
FCC as Custodian
1853 Newbury Ct.
Westlake, OH 44145-3331
-56-
<PAGE>
First Clearing Corporation 8,068.6750 17.10%
A/C 8406-2776
Trionix Research Lab Inc
8037 Bavaria Road
Twinsberg, OH 44087-2261
First Clearing Corporation 3,970.3510 8.41%
A/C 1202-4114
Eugene Arrigoni IRA
FCC as Custodian
4101 Grady Smith Road
Loganville, GA 30052-3650
First Clearing Corporation 4,029.0090 8.54%
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 SHARES
(CLASS C 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
First Clearing Corporation 7,993.9530 35.18%
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 14.54%
A/C 8645-8446
Ronald W. Watt
127 Public Sq #5200
Cleveland, OH 44114-1216
First Clearing Corporation 1,536.0980 6.76%
A/C 6785-6053
John Potochick
10889 Gordon Drive
Parma, OH 44130-5142
-57-
<PAGE>
First Clearing Corporation 2,660.0170 11.71%
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 7.20%
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 SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon & Co. (Reinv) 23,081,630.8510 79.03%
Attn: Trust Mutual Funds
Account #1023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 2,034,008.8840 6.96%
C/O National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. (Cash/Reinv) 3,187,178.9030 10.91%
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 SHARES
(CLASS C 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
-58-
<PAGE>
<CAPTION>
BALANCED ALLOCATION FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon & Co. TTEE 952,510.7760 5.02%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. (Reinv) 18,022,036.0010 94.98%
Attn: Trust Mutual Funds
Account #10023342
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
Soy Capital AG Services & Trust Co 446,596.6880 30.52%
455 N Main St
Decatur, IL 62523-1103
<CAPTION>
BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS C 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
<CAPTION>
BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
C/O National City Bank 32,054,117.3440 32.26%
Sheldon & Co
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 30,197,454.9280 30.40%
P.O. Box 94984
Attn: Trust Mutual Funds
Cleveland, OH 44101-4984
-59-
<PAGE>
Sheldon & Co. (Cash/Reinv) 36,276,968.8510 36.51%
c/o National City Bank
Attn: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
GNMA FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
Post & Co A/C 356678 12,334.2530 9.37%
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 7.06%
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 SHARES
(CLASS B SHARES) OWNED
<S> <C> <C>
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 Beyer
Personal and Confidential
23826 Lorain Rd
North Olmsted, OH 44070-2226
First Clearing Corporation 4,130.6750 24.99%
A/C 6379-0631
Jane F. Obodzinski
1205 Brookpark Road
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
-60-
<PAGE>
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
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 SHARES
(CLASS C 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
-61-
<PAGE>
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
<CAPTION>
GNMA FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
C/o National City Bank 1,135,296.4190 9.18%
Sheldon & Co.
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 8,711,186.1090 70.46%
C/O National City Bank
Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 2,451,076.9800 19.83%
C/O Sheldon & Co.
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
INTERMEDIATE BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
Soy Capital AG Services & Trust Co. 170,722.5700 15.12%
455 N. Main Street
Decatur, IL 62523-1103
<CAPTION>
INTERMEDIATE BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS C 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
-62-
<PAGE>
<CAPTION>
INTERMEDIATE BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon & Co. (Reinv) 5,716,069.9690 15.44%
Attn: Trust Mutual Funds
Account #10023342
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. 13,920,364.4490 37.59%
P.O. Box 94984
Attn: Trust Mutual Funds
Cleveland, OH 44101-4984
Sheldon & Co. 12,398,824.6310 33.48%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
SEI Trust Company 4,659,441.3020 12.58%
Attn: Mutual Fund Administrator
One Freedom Valley Drive
Oaks, PA 19456
<CAPTION>
LIMITED MATURITY BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
Soy Capital AG Services & Trust Co. 208,281.2210 21.75%
455 N. Main Street
Decatur, IL 62523-1103
Bisys BD Services, Inc. 153,372.3470 16.02%
P.O. Box 4054
Concord, CA 94524-4054
<CAPTION>
LIMITED MATURITY BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS B SHARES) OWNED
<S> <C> <C>
Shore West Construction 401(k) Plan 4,356.7040 5.63%
Gary Scothon
Attn: Barbara Beyer
Personal and Confidential
23826 Lorain Rd
North Olmsted, OH 44070-2226
First Clearing Corporation 4,300.5390 5.56%
A/C 4753-9962
Larry D. Kiefer IRA R/O
FCC as Custodian
RR 2 Box 118
Gridley, IL 61744-9304
-63-
<PAGE>
First Clearing Corporation 4,143.3770 5.36%
A/C 6379-0631
Jane F. Obodzinski
1205 Brookpark Road
Cleveland, OH 44109-5827
First Clearing Corporation 3,960.7070 5.12%
A/C 4296-9582
C Edward Howerton
4721 Willowbrook Lane
Decatur, IL 62521-4266
First Clearing Corporation 4,224.0730 5.46%
A/C 6309-4604
Marianne Peterson
957 St. John
Lincoln Park, MI 48146
First Clearing Corporation 3,953.3010 5.11%
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 SHARES
(CLASS C 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 SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
National City Bank 3,422,764.3300 17.24%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
National City Bank 6,796,548.5690 34.22%
ATTN: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
-64-
<PAGE>
Sheldon & Co. (Reinv) 4,953,961.6090 24.95%
Future Quest
c/o National City Bank
Attn: Trust Mutual Funds/01-999999774
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 3,372,268.0530 16.98%
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 SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
Fifth Third Bank TTEE 207,736.6560 38.91%
FBO IBEW 688 RETIRE SAV NAMCO
5/3 a/C # 52-52-002-7034614
P.O. Box 630074
Cincinnati, OH 45263-0001
Fifth Third Bank TTEE 219,128.9190 41.05%
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 SHARES
(CLASS B 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
-65-
<PAGE>
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 SHARES
(CLASS C 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 SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon & Co. (Reinv) 17,793,018.4710 50.70%
Attn: Trust Mutual Funds
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon & Co. 8,226,326.1710 23.44%
P.O. Box 94777
Attn: Trust Mutual Funds
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 5,844,574.2510 16.65%
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 SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
Soy Capital AG Services & Trust Co 521,641.9730 22.72%
455 N. Main Street
Decatur, IL 62523-1103
Bisys BD Services, Inc. 130,530.8570 5.68%
P.O. Box 4054
Concord, CA 94524-4054
SEI Investments Co. 11.2740 100.00%
Attn: Rob Silvestri
1 Freedom Valley Rd.
Oaks, PA 19456
-66-
<PAGE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon & Co. (Reinv) 2,486,375.9150 16.45%
ATTN: Trust Mutual Funds
Account #10023342
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 12,260,945.8300 81.13%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
MICHIGAN MUNICIPAL BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS B SHARES) OWNED
<S> <C> <C>
First Clearing Corporation 15,204.6940 8.95%
A/C 1474-8811
Marion E. Belloni
27715 Alger Lane
Madison Heights, MI 48071-4523
First Clearing Corporation 9,825.4220 5.78%
A/C 6338-8396
Betty May Nicholas
866 Dursley
Bloomfield, MI 48304-2010
First Clearing Corporation 9,496.6760 5.59%
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 5.39%
A/C 6852-6451
Marylee A. Roven &
Sheryl C Roven
13644 Wesley
Southgate, MI 48195-1719
SEI Investments Co. 9.4880 100.00%
Attn: Rob Silvestri
1 Freedom Valley Rd.
Oaks, PA 19456
-67-
<PAGE>
<CAPTION>
MICHIGAN MUNICIPAL BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon & Co. (Reinv) 1,650,466.5360 11.02%
ATTN Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. TTEE 13,177,920.6510 87.97%
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
<CAPTION>
NATIONAL TAX EXEMPT BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS A 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 45.70%
A/C 1143-7442
Bill Anest
400 S. Curran
Grayslake, IL 60030-9784
<CAPTION>
NATIONAL TAX EXEMPT BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS B SHARES) OWNED
<S> <C> <C>
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
-68-
<PAGE>
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
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 SHARES
(CLASS C 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 SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon & Co. TTEE 13,609,198.2920 82.68%
c/o National City Bank
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
National City Bank 2,001,734.7220 12.16%
c/o Sheldon & Co.
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
-69-
<PAGE>
<CAPTION>
OHIO TAX EXEMPT BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
Evern Securities C/O BNY Clearing Services 28,219.4520 5.86%
Cust FBO
FFC Ellen Stirm MAVEC S/D IRA UA
A/C OL58-4485-3981
111 E. Kilbourn Ave
Milwaukee, WI 53202-6611
First Clearing Corporation 97,721.5960 20.28%
A/C 1528-5380
David J. Beverly &
Pamela C. Beverly
1128 Laguna Drive
Huron, OH 44839-2605
First Clearing Corporation 51,410.1760 10.67%
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 SHARES
(CLASS C 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 SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon and Co. (Cash) 13,578,007.5630 86.56%
National City Bank
Trust Mutual Funds - 5312
P.O. Box 94984
Cleveland, OH 44101-4984
Sheldon and Co. (Cash/Reinv) 1,590,746.1530 10.18%
National City Bank
Trust Mutual Funds-5312
P.O. Box 94777
Cleveland, OH 44101-4777
</TABLE>
-70-
<PAGE>
<TABLE>
<CAPTION>
PENNSYLVANIA MUNICIPAL BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS A 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
SEI Investments Co. 10.0900 100.00%
Attn: Rob Silvestri
1 Freedom Valley Rd.
Oaks, PA 19456
<CAPTION>
PENNSYLVANIA MUNICIPAL BOND FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
Sheldon and Co. 4,250,189.8750 94.52%
P.O. Box 94984
ATTN: Trust Mutual Funds
Cleveland, OH 44101-4984
<CAPTION>
TAX EXEMPT MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
National City MI/IL 19,292,000.000 9.73%
FBO Corporate PCG/Retail Sweep Cust
Cash Management Operations
770 W. Broad Street LOC 16-0347
Columbus, OH 43222-1419
-71-
<PAGE>
First Clearing Corporation 100,631,738.0800 50.74%
P.O. Box 6629
Glen Allen, VA 23058-6629
Indiana 13,299,284.0800 6.71%
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 37,923,102.7300 19.12%
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 SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
National City Bank 31,829,434.3500 7.35%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 119,853,497.7800 27.66%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 25,590,146.7500 5.91%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 34,952,975.8100 8.07%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 53,453,421.0300 12.34%
Operations Center
ATTN: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
-72-
<PAGE>
National City Bank 85,057,793.7800 19.63%
Money Market Unit/Loc. 5312
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 51,483,527.3500 11.88%
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 SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
National City MI/IL 121,404,000.000 7.26%
FBO Corporate Sweep Customer
Cash Management Operations
770 W. Broad Street Loc. 16-0347
Columbus, OH 43222-1419
Pennsylvania 331,296,000.0000 19.82%
FBO Corporate Autosweep Customers
C/o National Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15222-2003
Wheat First Securities 736,464,492.2300 44.05%
P.O. Box 6629
Glen Allen, VA 23058-6629
National City Bank 263,048,000.0000 15.73%
FBO PCG/Retail Sweep Customer
770 W. Broad St. Location 16-0347
Columbus, OH 43222-1419
National City Bank 86,357,066.9900 5.17%
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 SHARES
(CLASS B SHARES) OWNED
<S> <C> <C>
First Clearing Corporation 56,293.6900 11.28%
A/C 7335-5550
Roger L. Schafer IRA
FCC as Custodian
3945 7th Street
New Kensington, PA 15068-7205
-73-
<PAGE>
S&H Machine Products, Inc. 37,202.9500 7.46%
Stanimir M. Vitkovic
6180 West Smith Road
Medina, OH 44256-8949
First Clearing Corporation 90,318.2100 18.10%
A/C 2065-0386
Carborundum Grinding Wheel Co Savings Plan
1011 E. Front Street
P.O Box 759
Linda J. Newberry 28,321.2700 5.68%
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 SHARES
(CLASS C 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 SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
National City Bank 749,725,275.8500 24.37%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 344,208,113.6300 11.19%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 334,382,795.7500 10.87%
Operations Center
Attn: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
-74-
<PAGE>
National City Bank 547,512,558.1500 17.80%
Money Market Unit/Loc 5312
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 190,031,530.5700 6.18%
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 SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
National City MI/IL 195,728,000.0000 37.01%
FBO Corporate Sweep Customer
Cash Management Operations
770 W. Broad Street Loc. 16-0347
Columbus, OH 43222-1419
Pennsylvania 220,752,000.0000 41.75%
FBO Corporate Autosweep Customers
c/o National City Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15222-2003
Wheat First Securities 63,749,420.5200 12.06%
P.O. Box 6629
Glen Allen, VA 23058-6629
<CAPTION>
GOVERNMENT MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
National City Bank 147,232,690.6500 13.87%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 West 150th Street
Cleveland, OH 44135-1389
National City Bank 267,420,291.7100 25.20%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
-75-
<PAGE>
National City Bank 202,606,768.0700 19.09%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 135,909,099.2700 12.81%
Operations Center
Attn: Trust Operations Funds
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 122,318,760.0200 11.53%
Money Market Unit/Loc 5312
4100 W. 150th St
Cleveland, OH 44135-1389
National City Bank 77,541,211.5700 7.31%
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 SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
National City Bank MI/IL 62,281,000.000 72.13%
FBO Corporate Sweep Customer
Cash Management Operations
770 W. Broad St. Location 16-0347
Columbus, OH 43222-1419
Wheat First Securities 16,814,781.9400 19.47%
P.O. Box 6629
Glen Allen, VA 23058-6629
<CAPTION>
TREASURY MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
National City Bank 135,448,065.7600 32.81%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
-76-
<PAGE>
National City Bank 51,320,452.9400 12.43%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 38,102,557.8700 9.23%
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 34,123,799.6700 8.27%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 22,548,457.2700 5.46%
Trust Operations
Operations Center
3rd Floor, North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 36,222,633.5000 8.77%
Money Market Unit/Loc. 5312
4100 W 150th St
Cleveland, OH 44135-1389
National City Bank 35,695,067.7500 8.65%
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 SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
The Bank of New York 1,430,776.1700 88.95%
TRST FOA CCMT Series 1995-2
Attn: Craig Phildius
101 Barclay Street 12E
New York, NY 10286-0099
Sarasota Sailing Sqaratron Inc. 82,480.4300 5.13%
P.O. Box 1927
Sarasota, FL 34230-1927
-77-
<PAGE>
Sarasota Sailing Sqaratron Inc. 81,194.4400 5.05%
P.O. Box 1927
Sarasota, FL 34230-1927
<CAPTION>
TREASURY PLUS MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
National City Bank 146,426,278.6300 88.20%
Money Market Unit / Loc 5312
4100 W. 150th Street
Cleveland, OH 44135-1389
National City 11,448,367.7300 6.90%
Money Market Unit / Loc 5312
4100 W. 150th Street
Cleveland, OH 44135-1304
<CAPTION>
OHIO MUNICIPAL MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
(CLASS A SHARES) OWNED
<S> <C> <C>
National City Bank 2,473,697.7700 7.46%
FBO PCG/Retail Sweep Customers
770 W. Broad Street, Location 16-0347
Columbus, OH 43222-1419
National City Bank 27,091,022.5900 81.65%
FBO PCG/Retail Sweep Customers
770 W. Broad Street, Location 16-0347
Columbus, OH 43222-1419
First Clearing Corporation 1,784,539.9900 5.38%
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 SHARES
(CLASS I SHARES) OWNED
<S> <C> <C>
National City Bank 26,060,512.4100 19.94%
Trust Operations
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
-78-
<PAGE>
National City Bank 22,482,814.0200 17.20%
Trust Operations
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
National City Bank 67,593,843.3900 51.72%
Operations Center
3rd Floor North Annex
4100 W. 150th Street
Cleveland, OH 44135-1389
<CAPTION>
PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
CLASS (A SHARES) OWNED
<S> <C> <C>
Pennsylvania 27,379,000.0000 46.75%
FBO Corporate Autosweep Customers
c/o National City Bank of PA
300 Fourth Street 2-191
Pittsburgh, PA 15222-2003
Pennsylvania 28,040,975.5200 47.88%
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 106,415,574.4200 97.50%
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 4,723,407.7680 75.53%
FBO First Energy Corp.
Savings Plan
DTD 7/1/98
105 Rosemont Ave. WES/IN
Westwood, MA 02090-2318
-79-
<PAGE>
<CAPTION>
EQUITY GROWTH FUND
(CLASS B SHARES) OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
OWNED
<S> <C> <C>
First Clearing Corporation 6,778.2040 5.15%
A/C 4815-5374
Ernest Kline IRA
FCC 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 13.83%
A/C 7081-0852
Ridgway Community Nurses Srvcs
ATTN: Lori MacDonald
20 North Broad Street
Ridgway, PA 15853-1002
First Clearing Corporation 589.6640 6.38%
A/C 4858-4008
Mary S. Kowtun IRA
FCC as Custodian
6417 Rousseau Drive
Parma, OH 44129-6306
First Clearing Corporation 645.2610 7.08%
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 9.21%
A/C 6490-8961
Homer M. Osborne IRA
FCC as Custodian
5 Patricia St
Charleroi, PA 15022-9439
First Clearing Corporation 4,140.2400 44.83%
A/C 1294-3972
Robert Henry Baker Jr IRA
FCC as Custodian
834 Georgiana St
Port Angeles, WA 98362-3512
-80-
<PAGE>
<CAPTION>
EQUITY GROWTH FUND
(CLASS I SHARES) OUTSTANDING SHARES PERCENTAGE OF FUND SHARES
OWNED
<S> <C> <C>
Sheldon & Co. (Cash/Reinv) 12,128,801.3560 28.14%
c/o National City Bank
ATTN: Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
Sheldon & Co. 6,589,032.1930 15.29%
P.O. Box 94984
ATTN: Trust Mutual Funds
Cleveland, OH 44101-4984
C/O National City Bank 23,273,490.5250 54.00%
Shelden & Co.
Trust Mutual Funds
P.O. Box 94777
Cleveland, OH 44101-4777
</TABLE>
-81-
<PAGE>
APPENDIX A
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - 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.
A-1
<PAGE>
"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:
A-2
<PAGE>
"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.
A-3
<PAGE>
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.
A-4
<PAGE>
"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>
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.
A-6
<PAGE>
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 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
A-7
<PAGE>
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 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.
A-8
<PAGE>
"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.
"TBW-2" - This designation represents Thomson Financial BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of
A-9
<PAGE>
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.
A-10
<PAGE>
APPENDIX B
As stated in the Prospectus, the Strategic Income Bond Fund (the
"Fund") may enter into certain futures transactions and options for hedging
purposes. Such transactions are described in this Appendix.
INTEREST RATE FUTURES CONTRACTS
USE OF INTEREST RATE FUTURES CONTRACTS. Bond prices are established in
both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, the Fund may use interest rate futures
contracts as a defense, or hedge, against anticipated interest rate changes and
not for speculation. As described below, this would include the use of futures
contract sales to protect against expected increases in interest rates and
futures contract purchases to offset the impact of interest rate declines.
The Fund presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market, the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Fund, through using futures contracts.
DESCRIPTION OF INTEREST RATE FUTURES CONTRACTS. An interest rate
futures contract sale would create an obligation by the Fund, as seller, to
deliver the specific type of financial instrument called for in the contract at
a specific future time for a specified price. A futures contract purchase would
create an obligation by the Fund, as purchaser, to take delivery of the specific
type of financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until at or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.
Although interest rate futures contracts by their terms call for
actual delivery or acceptance of securities, in most cases the contracts are
closed out before the settlement date without the making or taking of delivery
of securities. Closing out a futures contract sale is effected by the Fund's
entering into a futures contract purchase for the same aggregate amount of the
specific type of financial instrument and the same delivery date. If the price
of the sale exceeds the price of the offsetting purchase, the Fund is
immediately paid the difference and thus realizes a gain. If the offsetting
purchase price exceeds the sale price, the Fund pays the difference and realizes
a loss. Similarly, the closing out of a futures contract purchase is effected by
the Fund
B-1
<PAGE>
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 time the purchase of long-term bonds
in light of the availability of advantageous interim
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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.
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
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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.
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
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than making or taking delivery. To the extent participants decide to make or
take delivery, liquidity in the futures market could be reduced thus producing
distortions. Third, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market may also cause temporary price distortions. Due to the
possibility of price distortion in the futures market, and because of the
imperfect correlation between the movements in the cash market and movements in
the price of futures, a correct forecast of general market trends or interest
rate movements by the advisers may still not result in a successful hedging
transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a liquid
secondary 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
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 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").
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9. Certificate of Classification of Shares reflecting the creation of
Class U and Class U-Special Series 1 shares, Class V and Class V-Special
Series 1 shares and Class W and Class W-Special Series 1 shares representing
interests in the International Equity, Equity Index and Core Equity Funds,
respectively, as filed with the Office of the Secretary of State of
Massachusetts on June 27, 1997 is incorporated herein by reference to
Exhibit 1(h) to Post-Effective Amendment No. 35 to Registrant's Registration
Statement filed on July 22, 1997 ("PEA No. 35").
10. Certificate of Classification of Shares reflecting the creation of
Class X and Class X-Special Series 1 shares and Class Y and Class Y-Special
Series 1 shares representing interests in the Small Cap Growth Fund and Real
Return Advantage Fund, respectively, as filed with the Office of the
Secretary of State of Massachusetts on June 27, 1997 is incorporated herein
by reference to Exhibit 1(i) to PEA No. 35.
11. Certificate of Classification of Shares reflecting the creation of
Special Series 2 Shares representing interests in the Money Market,
Government Money Market, Treasury Money Market, Tax-Exempt Money Market,
Equity Growth, Equity Income, Small Cap Value (formerly 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").
14. Form of Certificate of Classification of Shares reflecting the
creation of Special Series 3 Shares representing interests in the
International Equity, Small Cap Value, Small Cap Growth, Equity Growth, Tax
Managed Equity, Core Equity, Equity Index, Equity Income, Balanced
Allocation, Total Return Advantage, Bond, Intermediate Bond, GNMA, Enhanced
Income, Ohio Tax Exempt, Pennsylvania Municipal, National Tax Exempt, Mid
Cap Growth, Large Cap Ultra, U.S. Government Income, Michigan Municipal Bond
and Money Market Funds.
15. Form of Certificate of Classification of Shares representing
interests in the Treasury Plus Money Market, U.S. Government Income, Mid Cap
Growth and Michigan Municipal Bond Funds.
16. Form of Certificate of Classification of Shares reflecting the
creation of Class MM, Class MM -- Special Series 1, Class MM -- Special
Series 2 and Class MM -- Special Series 3 Shares representing interests in
the Strategic Income Bond Fund.
(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.
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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.
3. Amendment No. 3 to Code of Regulations as adopted by Registrant's
Board of Trustees on August 5, 1998.
4. Amendment No. 4 to Code of Regulations as adopted by Registrant's
Board of Trustees on July 17, 1997.
(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.
2. 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.
3. Interim Advisory Agreement for the Core Equity Fund between
Registrant and National Asset Management Corporation dated March 6, 1998 is
incorporated by reference to Exhibit 5(c) to PEA No. 44.
4. New Advisory Agreement for the Core Equity, 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.
5. Sub-Advisory Agreement for the Core Equity and Total Return
Advantage Funds between National City Bank and National Asset Management
Corporation dated March 6, 1998 is incorporated by reference to Exhibit
5(e) to PEA No. 44.
6. Advisory Agreement for the International Equity, Small Cap Value,
Small Cap Growth, Equity Index, Real Return Advantage, Tax Managed Equity,
Balanced Allocation and Ohio Municipal Money Market Funds between Registrant
and National City Bank dated April 9, 1998 is incorporated herein by
reference to Exhibit 5(m) Post-Effective Amendment No. 43 filed on July l,
1998 ("PEA No. 42").
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").
8. Form of Advisory Agreement for the Mid Cap Growth, Large Cap Ultra,
U.S. Government Income, Michigan Municipal Bond and Treasury Plus Money
Market Funds between Registrant and National City Investment Management
Company.
9. Form of Advisory Agreement for the Strategic Income Bond Fund
between Registrant and National City Investment Management Company.
(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.
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(f) None.
(g) 1. 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.
2. Sub-Custodian Agreement between National City Bank and The Bank of
California, National Association, dated November 7, 1994 is incorporated
herein by reference to Exhibit g.2 to PEA No. 48.
3. Amended Exhibit A, dated June 16, 2000, to the Custodian Services
Agreement between Registrant and National City Bank, dated November 7, 1994.
(h) 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. Amendment No. 1, dated February 22, 2000, to the Administration
Agreement between Registrant and SEI Fund Resources, dated May 1, 1998.
3. Sub-Administration Agreement between SEI Fund Resources and National
City Bank, dated May 1, 1998 is incorporated by reference to Exhibit
9(c) to PEA No. 44.
4. Amendment No. 1, dated February 22, 2000, to the Sub-Administration
Agreement between SEI Fund Resources and National City Bank, dated May 1,
1998.
5. 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.
6. 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.
7. Letter amendment, dated March 26, 1999, to Transfer Agency and
Service Agreement between State Street Bank and Trust Company, dated
March 1, 1997.
8. Revised Shareholder Services Plan adopted by the Board of Trustees
on February 15, 1997, is incorporated herein by reference to Exhibit
9(e) to PEA No. 33.
9. Form of Servicing Agreement.
10. 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 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) None.
(l) 1. Purchase Agreement between Registrant and McDonald & Company
Securities, Inc. dated January 28, 1986 is incorporated herein by reference
to Exhibit l.1 to PEA No. 48.
2. 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.
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3. 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.
4. 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.
5. 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.
6. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Limited Maturity Bond Fund (formerly
known as the Enhanced Income Fund), dated July 5, 1994 is incorporated
herein by reference to Exhibit 1.6 to PEA No. 48.
7. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Equity Income Portfolio, dated
June 30, 1994 is incorporated herein by reference to Exhibit l.7 to PEA No.
48.
8. 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.
9. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Total Return Advantage Fund, dated
July 5, 1994 is incorporated herein by reference to Exhibit l.9 to PEA No.
48.
10. 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.
11. Purchase Agreement between Registrant and 440 Financial
Distributors, Inc. with respect to the Pennsylvania Tax Exempt Money Market
Fund, dated September 6, 1996, is incorporated herein by reference to
Exhibit 13(j) to PEA No. 33.
12. Purchase Agreement between Registrant and 440 Financial
Distributors, Inc. with respect to the Intermediate Government Money Market
Fund, dated September 6, 1996, is incorporated herein by reference to
Exhibit 13(k) to PEA No. 33.
13. Purchase Agreement between Registrant and 440 Financial
Distributors, Inc. with respect to the GNMA Fund, dated September 6, 1996,
is incorporated herein by reference to Exhibit 13(l) to PEA No. 33.
14. Purchase Agreement between Registrant and 440 Financial
Distributors, Inc. with respect to the Pennsylvania Municipal Bond Fund,
dated September 6, 1996, is incorporated herein by reference to Exhibit
13(m) to PEA No. 33.
15. Purchase Agreement between Registrant and SEI Investments
Distribution Co. with respect to the Core Equity Fund is incorporated herein
by reference to Exhibit 13(n) to PEA No. 36.
16. Purchase Agreement dated August 1, 1997 between Registrant and SEI
Investments Distribution Co. with respect to the International Equity Fund
(Class U -- Special Series 1).
17. Form of Purchase Agreement between Registrant and SEI Investments
Distribution Co. with respect to the Equity Index Fund is incorporated
herein by reference to Exhibit 13(p) to PEA No. 33.
C-5
<PAGE>
18. Form of Purchase Agreement between Registrant and SEI Investments
Distribution Co. with respect to the Real Return Advantage Fund is
incorporated herein by reference to Exhibit 13(q) to PEA No. 33.
19. Purchase Agreement between Registrant and SEI Investments
Distribution Co. with respect to the Small Cap Growth Fund is incorporated
herein by reference to Exhibit 13(r) to PEA No. 36.
20. Form of Purchase Agreement between Registrant and SEI Investments
Distribution Co. with respect to Special Series 2 shares for each Fund is
incorporated herein by reference to Exhibit 13(s) to 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").
21. Form of Purchase Agreement between Registrant and SEI Investments
Distribution Co. with respect to the Balanced Allocation Fund.
22. Purchase Agreement dated September 14, 1998 between Registrant and
SEI Investments Distribution Co. with respect to the Ohio Municipal Money
Market Fund (Class BB and Class BB -- Special Series 1).
23. Purchase Agreement dated April 9, 1998 between Registrant and SEI
Investments Distribution Co. with respect to the Tax Managed Equity Fund
(Class Z, Class Z -- Special Series 1 and Class Z -- Special Series 2) and
the National Tax-Exempt Fund (Class L, Class L -- Special Series 1 and
Class L -- Special Series 2).
24. Purchase Agreement dated August 1, 1997 between Registrant and SEI
Investments Distribution Co. with respect to the International Equity Fund
(Class U).
25. Purchase Agreement dated January 2, 1998 between Registrant and SEI
Investments Distribution Co. with respect to Special Series 2 shares of the
Money Market, Small Cap Value, Equity Growth, Equity Income, Small Cap
Growth, International Equity, Core Equity, Intermediate Bond and Bond Funds.
26. Form of Purchase Agreement between Registrant and SEI Investments
Distribution Co. with respect to the Strategic Income Bond Fund (Class MM,
Class MM -- Special Series 1, Class MM -- Special Series 2 and Class MM --
Special Series 3).
(m) 1. Service and Distribution Plan for the A (formerly, Retail) and I
(formerly, Institutional) Share Classes is incorporated herein by reference
to Exhibit 15(a) to PEA No. 38.
2. B shares Distribution and Servicing Plan is incorporated herein by
reference to Exhibit 15(b) to PEA No. 38.
3. C Shares Distribution and Servicing Plan is incorporated herein by
reference to Exhibit m.3. to PEA No. 47.
(n) None.
(o) Revised Plan Pursuant to Rule 18f-3 for Operation of a
Multi-Class System is incorporated herein by reference to Exhibit (n) to PEA No.
47.
(p) 1. Code of Ethics of Armada Funds.
2. Code of Ethics of SEI Investments Distribution Co.
3. Code of Ethics of National City Investment Management Company.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Registrant is controlled by its Board of Trustees.
C-6
<PAGE>
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 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
C-7
<PAGE>
Custodian, nor any of its nominees, shall be indemnified against any
liability to the Trust or to its shareholders (or any expenses incident to
such liability) arising out of the Custodian's or its nominees' own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
In the event of any advance of cash for any purpose made by the Custodian
resulting from Oral or Written Instructions of the Trust, or in the event
that the Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in respect of the
Trust or any Fund in connection with the performance of this Agreement,
except such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any Property at any time
held for the account of the relevant Fund or the Trust shall be security
therefor.
Section 6 of Registrant's Transfer Agency Agreement provides as follows:
6. INDEMNIFICATION
6.1 The Bank shall not be responsible for, and the Fund shall on behalf of
the applicable Portfolio indemnify and hold the Bank harmless from and
against, any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful misconduct which
arise out of the breach of any representation or warranty of the Fund
hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors of
information, records, documents or services which (i) are received by
the 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
C-8
<PAGE>
which are reasonably believed to bear the proper manual or facsimile
signatures of the officers of the Fund, and the proper countersignature of
any former transfer agent or former registrar, or of a co-transfer agent or
co-registrar.
6.3 In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform
or otherwise from such causes.
6.4 In order that the indemnification provisions contained in this
Section 6 shall apply, upon the assertion of a claim for which the Fund may
be required to indemnify the Bank, the Bank shall promptly notify the Fund
of such assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option to
participate with the Bank in the defense of such claim or to defend against
said claim in its own name or in the name of the Bank. The Bank shall in no
case confess any claim or make any compromise in any case in which the Fund
may be required to indemnify the Bank except with the Fund's prior written
consent.
Registrant has obtained from a major insurance carrier a directors' and
officers' liability policy covering certain types of errors and omissions. In no
event will Registrant indemnify any of its trustees, officers, employees or
agents against any liability to which such person would otherwise be subject by
reason of his willful misfeasance, bad faith or gross negligence in the
performance of his duties, or by reason of his reckless disregard of the duties
involved in the conduct of his office or under his agreement with Registrant.
Registrant will comply with Rule 484 under the Securities Act of 1933 and
Release No. 11330 under the Investment Company Act of 1940 in connection with
any indemnification.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
(a) Investment Adviser: National City Investment Management Company
("IMC").
IMC performs investment advisory services for Registrant and certain other
investment advisory customers. IMC is an indirect wholly owned subsidiary of
National City Corporation (the "Corporation"). 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,
C-9
<PAGE>
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 OTHER BUSINESS
NAME MANAGEMENT COMPANY CONNECTIONS TYPE OF BUSINESS
---- --------------------------------------- ------------------ ----------------
<S> <C> <C> <C>
Kathleen T. Barr Managing Director, Sales and Marketing National City Bank Bank affiliate
Robert M. Leggett Vice Chairman of the Board, President National City Bank Bank affiliate
and Managing Director
Michael Minnaugh Chairman of the Board and Managing National City Bank Bank affiliate
Director
Joseph C. Penko Vice President and Director, Legal National City Bank Bank affiliate
Affairs
Donald L. Ross Chief Investment Officer and Managing National City Bank Bank affiliate
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>
OTHER BUSINESS
NAME POSITION WITH NATIONAL ASSET MANAGEMENT CONNECTIONS TYPE OF BUSINESS
---- --------------------------------------- ------------------ ----------------
<S> <C> <C> <C>
William F. Chandler Founder and Principal
Carl W. Hafele CEO and Principal None
Michael C. Heyman Principal None
David B. Hiller Principal None
Stephen G. Mullins Principal None
Larry J. Walker Principal None
John W. Ferreby Principal None
Catherine R. Stodghill Principal None
Erik N. Evans Principal None
Brent A. Bell Principal None
Randall T. Zipfel COO and Principal None
Matt Bevin Principal None
Dave Chick Principal None
</TABLE>
C-10
<PAGE>
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 Fund
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.
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").
C-11
<PAGE>
(b) Furnish the information required by the following table with respect to
each director, officer or partner of each principal underwriter named in the
answer to Item 21 of Part B. Unless otherwise noted, the principal business
address of each director or officer is Oaks, PA 19456.
<TABLE>
<CAPTION>
POSITIONS AND
OFFICES WITH
NAME POSITION AND OFFICE WITH UNDERWRITER 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 --
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 --
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 --
Timothy D. Barto Vice President & Assistant Secretary Assistant
Treasurer
</TABLE>
C-12
<PAGE>
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.
None.
C-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, Registrant has duly caused this
Post-Effective Amendment No. 52 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 18th day of July, 2000.
<TABLE>
<S> <C> <C>
ARMADA FUNDS
Registrant
By: /s/ *ROBERT D. NEARY
-----------------------------------------
TRUSTEE AND CHAIRMAN OF THE BOARD
Robert D. Neary
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 52 to Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOHN H. LEVEN
------------------------------ Treasurer July 18, 2000
John H. Leven
/s/ *LEIGH CARTER
------------------------------ Trustee July 18, 2000
Leigh Carter
/s/ *JOHN F. DURKOTT
------------------------------ Trustee July 18, 2000
John F. Durkott
/s/ *ROBERT J. FARLING
------------------------------ Trustee July 18, 2000
Robert J. Farling
/s/ *RICHARD W. FURST
------------------------------ Trustee July 18, 2000
Richard W. Furst
/s/ GERALD GHERLEIN
------------------------------ Trustee July 18, 2000
Gerald Gherlein
/s/ *HERBERT MARTENS
------------------------------ President and Trustee July 18, 2000
Herbert Martens
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ *ROBERT D. NEARY
------------------------------ Trustee and Chairman of July 18, 2000
Robert D. Neary the Board
/s/ *J. WILLIAM PULLEN
------------------------------ Trustee July 18, 2000
J. William Pullen
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ W. BRUCE MCCONNEL
-------------------------
W. Bruce McConnel
ATTORNEY-IN-FACT
</TABLE>
C-15
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS
---------------------
<C> <S> <C>
(a)(14) Form of Certificate of Classification of Shares reflecting
the creation of Special Series 3 Shares representing
interests in the International Equity, Small Cap Value,
Small Cap Growth, Equity Growth, Tax Managed Equity, Core
Equity, Equity Index, Equity Income, Balanced Allocation,
Total Return Advantage, Bond, Intermediate Bond, GNMA,
Enhanced Income, Ohio Tax Exempt, Pennsylvania Municipal,
National Tax Exempt, Mid Cap Growth, Large Cap Ultra, U.S.
Government Income, Michigan Municipal Bond and Money
Market Funds
(a)(15) Form of Certificate of Classification of Shares representing
interests in the Treasury Plus Money Market, U.S.
Government Income, Aggressive Allocation, Conservative
Allocation, Mid Cap Growth and Michigan Municipal Bond
Funds
(a)(16) Form of Certificate of Classification of Shares reflecting
the creation of Class MM -- Special Series 1,
Class MM -- Special Series 2 and Class MM -- Special
Series 3 Shares representing interests in the Strategic
Income Bond Fund
(b)(3) Amendment No. 3 to Code of Regulations
(b)(4) Amendment No. 4 to Code of Regulations
(d)(8) Form of Advisory Agreement for the Mid Cap Growth, Large Cap
Ultra, U.S. Government Income, Michigan Municipal Bond and
Treasury Money Market Funds between Registrant and
National City Investment Management Company
(d)(9) Form of Advisory Agreement for the Strategic Income Bond
Fund between Registrant and National City Investment
Management Company
(g)(3) Amended Exhibit A, dated June 16, 2000 to the Custodian
Services Agreement between Registrant and National City
Bank, dated November 7, 1994
(h)(2) Amendment No. 1 dated February 22, 2000, to the
Administration Agreement between Registrant and SEI Fund
Resources, dated May 1, 1998
(h)(4) Amendment No. 1, dated February 22, 2000, to the
Sub-Administration Agreement between SEI Fund Resources
and National City Bank, dated May 1, 1998
(h)(7) Letter amendment dated March 26, 1999, to the Transfer
Agency and Service Agreement between State Street Bank and
Trust Company, dated March 1, 1997
(h)(9) Form of Servicing Agreement
(j) Consent of Drinker Biddle & Reath LLP
(l)(16) Purchase Agreement dated August 1, 1997 between Registrant
and SEI Investments Distribution Co. with respect to the
International Equity Fund (Class U -- Special Series 1)
(l)(21) Form of Purchase Agreement between Registrant and SEI
Investments Distribution Co. with respect to the Balanced
Allocation Fund
(l)(22) Purchase Agreement dated September 14, 1998 between
Registrant and SEI Investments Distribution Co. with
respect to the Ohio Municipal Money Market Fund
(l)(23) Purchase Agreement dated April 9, 1998 between Registrant
and SEI Investments Distribution Co. with respect to the
Tax Managed Equity Fund and the National Tax-Exempt Fund
(l)(24) Purchase Agreement dated August 1, 1997 between Registrant
and SEI Investments Distribution Co. with respect to the
International Equity Fund
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
---------------------
<C> <S> <C>
(l)(25) Purchase Agreement January 2, 1998 between Registrant and
SEI Investments Distribution Co. with respect to Special
Series 2 shares of the Money Market, Small Cap Value,
Equity Growth, Equity Income, Small Cap Growth,
International Equity, Core Equity, Intermediate Bond and
Bond Funds
(l)(26) Form of Purchase Agreement between Registrant and SEI
Investments Distribution Co. with respect to the Strategic
Income Bond Fund
(p)(1) Code of Ethics of Armada Funds
(p)(2) Code of Ethics of SEI Investments Distribution Co.
(p)(3) Code of Ethics of National City Investment Management
Company
</TABLE>
<PAGE>
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: July 18, 2000
<PAGE>
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Robert D.
Neary, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
/s/ Robert D. Neary
-------------------
Robert D. Neary
<PAGE>
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Leigh
Carter, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
/s/ Leigh Carter
----------------
Leigh Carter
<PAGE>
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, John F.
Durkott, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
/s/ John F. Durkott
-------------------
John F. Durkott
<PAGE>
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Richard W.
Furst, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
/s/ Richard W. Furst
--------------------
Richard W. Furst
<PAGE>
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Robert J.
Farling, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: November 19, 1997
/s/ Robert J. Farling
---------------------
Robert J. Farling
<PAGE>
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, J. William
Pullen, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
/s/ J. William Pullen
----------------------
J. William Pullen
<PAGE>
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Herbert R.
Martens, Jr. , hereby constitutes and appoints W. Bruce McConnel, III, his true
and lawful attorney, to execute in his name, place, and stead, in his capacity
as Trustee or officer, or both, of Armada Funds, the Registration Statement and
any amendments thereto and all instruments necessary or incidental in connection
therewith, and to file the same with the Securities and Exchange Commission; and
said attorney shall have full power and authority to do and perform in his name
and on his behalf, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and purposes
as he might or could do in person, said acts of said attorney being hereby
ratified and approved.
DATED: September 17, 1997
/s/ Herbert R. Martens, Jr.
---------------------------
Herbert R. Martens, Jr.
<PAGE>
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Gerald L.
Gherlein, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
/s/ Gerald L. Gherlein
----------------------
Gerald L. Gherlein
